REGULATORY CAPITAL REQUIREMENTS

3 Months Ended

Mar. 31, 2015

Banking And Thrift [Abstract]

REGULATORY CAPITAL REQUIREMENTS

13. REGULATORY CAPITAL REQUIREMENTS

Home Savings and United Community is subject to various regulatory capital requirements administered by the federal banking agencies. During the first quarter of 2015, Home Savings and United Community adopted the new Basel III regulatory capital framework as approved by the federal banking agencies. The adoption of this new framework modified the calculation of the various capital ratios, added a new ratio, common equity tier 1, and revised the adequately and well capitalized thresholds. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Home Savings and United Community. The regulations require Home Savings to meet specific capital adequacy guidelines in keeping with the regulatory framework for prompt corrective action that involve quantitative measures of Home Savings’ assets, liabilities, and certain off balance sheet items as calculated under regulatory accounting practices. Home Savings’ capital classification is also subject to qualitative judgments by the regulators about components of capital, risk weightings, and other factors.

In July 2013, United Community’s primary federal regulator, the FRB, and Home Savings’ primary federal regulator, the FDIC, along with other regulatory agencies, published final rules (the Basel III Capital Rules) that revised their leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act. Among other things, the rule establishes a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), increases the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigns a higher risk weight (150%) to exposures that are more than 90 days past due or are on nonaccrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The final rule also requires unrealized gains and losses on certain available-for-sale securities holdings to be included for purposes of calculating regulatory capital requirements unless a one-time opt-in or opt-out is exercised. In connection with the adoption of the Basel III Capital Rules, United Community and Home Savings elected to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1.  The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital risk-based weighted assets in addition to the amount necessary to meeting its minimum risk-based capital requirements.

The final rule became effective for Home Savings on January 1, 2015. The capital conservation buffer requirement will be phased in beginning January 1, 2016 and ending January 1, 2019, when the full capital conservation buffer requirement will be effective. The final rule also implements consolidated capital requirements, effective January 1, 2015.

Quantitative measures established by regulation for capital adequacy require Home Savings to maintain minimum ratios of Tier 1 (or Core) capital (as defined in the regulations) to average total assets (as defined) and of total risk-based capital (as defined) to risk-weighted assets (as defined).  United Community and Home Savings’ Common Equity Tier 1 capital consists of common stock and related paid-in capital, net of treasury stock, and retained earnings. In connection with the adoption of the Basel III Capital Rules, United Community and Home Savings elected to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1. Common Equity Tier 1 for both United Community and Home Savings is reduced by intangible assets, net of associated deferred tax liabilities and subject to transition provisions. Actual and regulatory required capital ratios for Home Savings, along with the dollar amount of capital implied by such ratios, are presented below.

	March 31, 2015
											To Be Well Capitalized
						Minimum Capital					Under Prompt
						Requirements For Capital					Corrective Action
	Actual					Adequacy Purposes					Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total risk-based capital (to risk-weighted assets)	$	233,544		20.48	%	$	91,235		8.00	%	$	114,044		10.00	%
Tier 1 capital (to risk-weighted assets)		219,252		19.23	%		68,426		6.00	%		91,235		8.00	%
Common equity Tier 1 capital (to risk-weighted assets)		219,252		19.23	%		51,320		4.50	%		74,128		6.50	%
Tier 1 capital (to average total assets)**		219,252		11.99	%		74,056		4.00	%		92,570		5.00	%

	December 31, 2014
											To Be Well Capitalized
						Minimum Capital					Under Prompt
						Requirements					Corrective Action
	Actual					Per Regulation					Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total risk-based capital to risk-weighted assets	$	233,974		21.13	%	$	88,602		8.00	%	$	110,752		10.00	%
Tier 1 capital to risk-weighted assets		220,080		19.87	%	*		*				66,451		6.00	%
Tier 1 capital to average total assets**		220,080		12.11	%		72,674		4.00	%		90,843		5.00	%

* Ratio was not required under regulations existing at that time

** Tier 1 Leverage Capital Ratio

Management believes that as of March 31, 2015 and December 31, 2014, Home Savings meets all capital adequacy requirements to which they were subject.  As of March 31, 2015 and December 31, 2014, Home Savings was considered well capitalized.

The components of Home Savings’ regulatory capital are as follows:

	March 31, 2015			December 31, 2014
Total shareholders' equity	$	225,314		$	217,372
Add (deduct)
Accumulated other comprehensive income		16,126			20,015
Intangible assets		(28	)		(84	)
Disallowed deferred tax assets		(22,160	)		(17,223	)
Disallowed capitalized mortgage loan servicing rights		—			—
Tier 1 Capital		219,252			220,080
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		14,292			13,894
Total risk-based capital	$	233,544		$	233,974

Actual and regulatory required consolidated capital ratios for United Community, along with the dollar amount of capital implied by such ratios, are presented below.

	March 31, 2015
											To Be Well Capitalized
						Minimum Capital					Under Prompt
						Requirements For Capital					Corrective Action
	Actual					Adequacy Purposes					Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
Total capital (to risk-weighted assets)	$	253,336		22.19	%	$	91,336		8.00	%	$	114,170		10.00	%
Tier 1 capital (to risk-weighted assets)		239,028		20.94	%		68,502		6.00	%		91,336		8.00	%
Common equity Tier 1 capital (to risk-weighted assets)		239,028		20.94	%		51,376		4.50	%		74,210		6.50	%
Tier 1 capital (to average assets)**		239,028		13.07	%		74,137		4.00	%		92,672		5.00	%

The components of United Community’s consolidated regulatory capital are as follows:

	March 31, 2015
Total shareholders' equity	$	247,104
Add (deduct)
Accumulated other comprehensive income		16,108
Intangible assets		(28	)
Disallowed deferred tax assets		(24,156	)
Disallowed capitalized mortgage loan servicing rights		—
Tier 1 Capital		239,028
Allowance for loan losses and allowance for unfunded lending commitments limited to 1.25% of total risk-weighted assets		14,308
Total risk-based capital	$	253,336