Capital Requirements

9 Months Ended

Sep. 30, 2014

Capital Requirements

Capital Requirements

11) Capital Requirements

        The Company and its subsidiary bank are subject to various regulatory capital requirements administered by the 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 financial statements and operations. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and HBC must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

        Quantitative measures established by regulation to help ensure capital adequacy require the Company and HBC to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Management believes that, as of September 30, 2014 and December 31, 2013, the Company and HBC met all capital adequacy guidelines to which they were subject.

        The Company's consolidated capital amounts and ratios are presented in the following table, together with capital adequacy requirements.

	Actual					To Be Well-Capitalized Under Regulatory Requirements					Required For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of September 30, 2014:
Total Capital	$	195,606		15.3	%	$	128,033		10.0	%	$	102,427		8.0	%
(to risk-weighted assets)
Tier 1 Capital	$	179,563		14.0	%	$	76,820		6.0	%	$	51,213		4.0	%
(to risk-weighted assets)
Tier 1 Capital	$	179,563		11.7	%		N/A		N/A		$	61,407		4.0	%
(to average assets)
As of December 31, 2013:
Total Capital	$	179,916		15.3	%	$	117,581		10.0	%	$	94,065		8.0	%
(to risk-weighted assets)
Tier 1 Capital	$	165,612		14.0	%	$	70,549		6.0	%	$	47,032		4.0	%
(to risk-weighted assets)
Tier 1 Capital	$	165,612		11.2	%		N/A		N/A		$	59,083		4.0	%
(to average assets)

        HBC's actual capital and required amounts and ratios are presented in the following table.

	Actual					To Be Well-Capitalized Under Prompt Corrective Action Provisions					Required For Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of September 30, 2014:
Total Capital	$	183,501		14.3	%	$	128,216		10.0	%	$	102,573		8.0	%
(to risk-weighted assets)
Tier 1 Capital	$	167,436		13.1	%	$	76,930		6.0	%	$	51,286		4.0	%
(to risk-weighted assets)
Tier 1 Capital	$	167,436		10.9	%	$	76,841		5.0	%	$	61,473		4.0	%
(to average assets)
As of December 31, 2013:
Total Capital	$	163,827		13.9	%	$	117,872		10.0	%	$	94,297		8.0	%
(to risk-weighted assets)
Tier 1 Capital	$	149,037		12.6	%	$	70,723		6.0	%	$	47,148		4.0	%
(to risk-weighted assets)
Tier 1 Capital	$	149,037		10.1	%	$	73,858		5.0	%	$	59,086		4.0	%
(to average assets)

        As of September 30, 2014 the Company's and HBC's capital ratios exceed the highest regulatory capital requirement of prompt corrective provisions. There are no conditions or events since September 30, 2014 that management believes have changed the categorization of the Company or HBC as well capitalized.

        HCC is dependent upon dividends from HBC. Under California General Corporation Law, the holders of common stock are entitled to receive dividends when and as declared by the Board of Directors, out of funds legally available. The California Financial Code provides that a state licensed bank may not make a cash distribution to its shareholders in excess of the lesser of the following: (i) the bank's retained earnings; or (ii) the bank's net income for its last three fiscal years, less the amount of any distributions made by the bank to its shareholders during such period. However, a bank, with the prior approval of the Commissioner of the California Department of Business Oversight—Division of Financial Institutions ("DBO") may make a distribution to its shareholders of an amount not to exceed the greater of (i) a bank's retained earnings; (ii) its net income for its last fiscal year; or (iii) its net income for the current fiscal year. Also with the prior approval of the Commissioner of the DBO and the shareholders of the bank, the bank may make a distribution to its shareholders, as a reduction in capital of the bank. In the event that the Commissioner determines that the shareholders' equity of a bank is inadequate or that the making of a distribution by a bank would be unsafe or unsound, the Commissioner may order a bank to refrain from making such a proposed distribution. As of September 30, 2014, HBC would be required to obtain regulatory approval from the DBO for a dividend or other distribution to HCC. Similar restrictions applied to the amount and sum of loan advances and other transfers of funds from HBC to the parent company.