REGULATORY CAPITAL AND OTHER REGULATORY MATTERS

3 Months Ended

Mar. 31, 2015

Banking and Thrift [Abstract]

REGULATORY CAPITAL AND OTHER REGULATORY MATTERS

REGULATORYCAPITAL AND OTHER REGULATORY MATTERS

Regulatory Capital. The Company and First Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain actions by regulators that, if undertaken, could have a direct material effect on the operations and financial condition of the Company and First Bank. Under these capital requirements, the Company and First Bank 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 ensure capital adequacy require the Company and First Bank to maintain minimum amounts and ratios of total capital, Tier 1 capital and common equity Tier 1 capital to risk-weighted assets (as defined in the regulations), and of Tier 1 capital to average assets (“Tier1 leverage ratio”).

In July 2013, the federal bank regulators approved final rules (the “Final Capital Rules”) implementing the Basel III framework as well as certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Final Capital Rules also substantially revise the risk-based capital requirements applicable to bank holding companies and their depository institution subsidiaries, including the Company and First Bank, as compared to the general risk-based capital rules (the “General Risk-Based Capital Rules”). The Final Capital Rules revise the components of capital and address other issues affecting the numerator in regulatory capital ratios. The Final Capital Rules also address asset risk weights and other issues affecting the denominator in regulatory capital ratios and replace the existing general risk-weighting approach based on Basel I with a more risk-sensitive approach. The Final Capital Rules became effective for the Company and First Bank on January 1, 2015 (subject to a phase-in period for certain provisions). The calculation of common equity Tier 1 capital is different from the calculation of common equity under GAAP. Most significantly for the Company, the Company's net deferred tax assets, which are included in the calculation of common equity under GAAP, will be substantially phased out over time from the required calculation of common equity Tier 1 capital for regulatory purposes. The net deferred tax assets attributable to net operating loss and tax credit carryforwards, which comprised over 91.8% of the Company's net deferred tax assets as of March 31, 2015, are scheduled to be phased out entirely from inclusion in the calculation of common equity Tier 1 capital in 2018. In addition, the inclusion of trust preferred securities eligible for Tier 1 capital is more limited under the Final Capital Rules.

The Company must maintain minimum total capital, Tier 1 capital, common equity Tier 1 capital and Tier 1 leverage ratios as set forth in the table below in order to meet the minimum capital adequacy standards. The Company was categorized as adequately capitalized under minimum regulatory capital standards established for bank holding companies by the Federal Reserve at December 31, 2014. The Company was not categorized as adequately capitalized under minimum regulatory capital standards established for bank holding companies by the Federal Reserve at March 31, 2015 as a result of not meeting the required common equity Tier 1 requirement under the Final Capital Rules.

First Bank was categorized as well capitalized at March 31, 2015 and December 31, 2014 under the prompt corrective action provisions of the regulatory capital standards. First Bank must maintain minimum total capital, Tier 1 capital, common equity Tier 1 capital and Tier 1 leverage ratios as set forth in the table below in order to be categorized as well capitalized.

At March 31, 2015 and December 31, 2014, the Company’s and First Bank’s required and actual capital ratios were as follows:

										Final Capital Rules (Effective January 1, 2015)				General Risk-Based Capital Rules (Prior to January 1, 2015)
												To be Well Capitalized Under Prompt Corrective Action Provisions				To be Well Capitalized Under Prompt Corrective Action Provisions
	Actual									For Capital Adequacy Purposes				For Capital Adequacy Purposes
	March 31, 2015					December 31, 2014
(dollars in thousands)	Amount			Ratio		Amount		Ratio
Total capital (to risk-weighted assets):
First Banks, Inc.	$	582,115		14.88	%	$	475,312	12.25	%	8.0	%	N/A		8.0	%	N/A
First Bank	660,631			16.80		691,350		17.81		8.0		10.0	%	8.0		10.0	%
Tier 1 capital (to risk-weighted assets):
First Banks, Inc.	283,962			7.26		284,396		7.33		6.0		N/A		4.0		N/A
First Bank	612,837			15.59		642,593		16.55		6.0		8.0		4.0		6.0
Common equity Tier 1 capital (to risk-weighted assets):
First Banks, Inc.	(44,624		)	(1.14	)	N/A		N/A		4.5		N/A		N/A		N/A
First Bank	612,837			15.59		N/A		N/A		4.5		6.5		N/A		N/A
Tier 1 capital (to average assets):
First Banks, Inc.	283,962			5.02		284,396		5.01		4.0		N/A		4.0		N/A
First Bank	612,837			10.78		642,593		11.35		4.0		5.0		4.0		5.0

Regulatory Agreements. On May 19, 2014, the Company entered into an MOU with the FRB. The MOU is characterized by regulatory authorities as an informal action that is neither published nor made publicly available by the FRB and is used when circumstances warrant a milder form of action than a formal supervisory action. Under the terms of the MOU, the Company agreed, among other things, to provide certain information to the FRB including, but not limited to, progress of achieving its Capital Plan, notice of plans to materially change its Capital Plan, parent company cash flow plans and summaries of nonperforming asset classifications. In addition, the Company agreed not to do any of the following without the prior approval of the FRB: (i) declare or pay any dividends on its common or preferred stock; (ii) incur or guarantee any debt; (iii) redeem any of the Company's outstanding common or preferred stock; and (iv) cause First Bank to pay dividends in excess of its earnings or make a capital distribution that would cause First Bank's Tier 1 Leverage Ratio to fall below 9.0%. The FRB has complete discretion to grant any such approval and therefore, it is not known whether the FRB would approve any such request.

While the Company intends to take such actions as may be necessary to comply with the requirements of the MOU with the FRB, there can be no assurance that such efforts will not have adverse effects on the operations and financial condition of the Company or First Bank. If the Company fails to comply with the terms of the MOU, further enforcement action could be taken by the FRB which could have a materially adverse effect on the Company's business, financial condition or results of operations.