SHAREHOLDERS' EQUITY, DIVIDEND RESTRICTIONS AND OTHER REGULATORY MATTERS

12 Months Ended

Dec. 31, 2012

Regulatory Capital Requirements [Abstract]

Shareholders' Equity, Dividend Restrictions and Other Regulatory Matters

Various regulatory agencies have established guidelines that evaluate capital adequacy based on risk-weighted adjusted assets. An additional capital computation evaluates tangible capital based on tangible assets. Minimum capital requirements currently set forth by the regulatory agencies require a tier 1 capital ratio of no less than 4 percent of risk-weighted assets, a total capital ratio of no less than 8 percent of risk-weighted assets, and a leverage capital ratio of no less than 3 percent of tangible assets. To meet the FDIC’s well-capitalized standards, the tier 1 and total capital ratios must be at least 6 percent and 10 percent, respectively, while the leverage ratio must equal 5 percent. Failure to meet minimum capital requirements may result in certain actions by regulators that could have a direct material effect on the consolidated financial statements.

Based on the most recent notifications from its regulators, FCB is well-capitalized under the regulatory framework for prompt corrective action. Management believes that as of December 31, 2012, BancShares and FCB met all capital adequacy requirements to which they are subject and was not aware of any conditions or events that would affect FCB’s well-capitalized status.

Following is an analysis of capital ratios for BancShares and FCB as of December 31, 2012, and 2011:

	December 31, 2012						December 31, 2011
	Amount		Ratio		Requirement for Well-Capitalized		Amount		Ratio		Requirement for Well-Capitalized
BancShares
Tier 1 capital	$	1,949,985	14.27	%	6.00	%	$	2,072,610	15.41	%	6.00	%
Total capital	2,179,370		15.95		10.00		2,323,022		17.27		10.00
Leverage capital	1,949,985		9.22		5.00		2,072,610		9.90		5.00
FCB
Tier 1 capital	1,942,101		14.37		6.00		1,968,032		14.75		6.00
Total capital	2,163,034		16.00		10.00		2,211,235		16.57		10.00
Leverage capital	1,942,101		9.34		5.00		1,968,032		9.53		5.00

As of December 31, 2012, tier 1 capital and total capital for BancShares include $93,500 of outstanding trust preferred securities that currently qualify as capital. However, beginning in 2013 provisions of the Dodd-Frank Act disallow the inclusion of trust preferred securities in the capital ratio calculations. Beginning in 2013, one-third of the $93,500 currently included in tier 1 capital will be excluded from capital, with two-thirds eliminated in 2014, and the entire amount of trust preferred securities excluded beginning in 2015. Proforma elimination of all BancShares' trust preferred securities from December 31, 2012, capital would result in a proforma tier 1 leverage ratio of 8.78 percent, a proforma tier 1 risk-based ratio of 13.59 percent and a proforma total risk-based ratio of 15.27 percent. BancShares would continue to remain well-capitalized under current regulatory guidelines.

Tier 2 capital of BancShares and FCB includes qualifying subordinated debt that was issued in 2005 with a scheduled maturity date of June 1, 2015. Under current regulatory guidelines, when subordinated debt is within five years of its scheduled maturity date, issuers must discount the amount included in tier 2 capital by 20 percent for each year until the debt matures. The amount of subordinated debt that qualifies as tier 2 capital totaled $50.0 million as of December 31, 2012, compared to $75.0 million at December 31, 2011. The amount of subordinated debt eligible to be included in tier 2 capital will decline

$25.0 million in the second quarter of 2013 to $25.0 million and the subordinated debt will be completely removed from tier 2 capital in the second quarter of 2014.     

BancShares has two classes of common stock—Class A common and Class B common. Shares of Class A common have one vote per share, while shares of Class B common have 16 votes per share.

During 2012, the Board of Directors granted authority to purchase up to 100,000 and 25,000 shares of Class A and Class B common stock, respectively, during the period from July 1, 2012 through June 30, 2013. That authority replaced similar plans approved by the Board during 2011 that were in effect during the twelve months preceding July 1, 2012. Pursuant to those plans, during 2012, BancShares purchased and retired an aggregate of 56,276 shares of Class A common stock and 100 shares of Class B common stock. Additionally, pursuant to separate authorizations, during 2012, BancShares purchased and retired 606,829 shares of Class B common stock in privately negotiated transactions, including purchases of 593,954 shares during December 2012 from a director and certain of her related interests which were approved by the independent Directors, after review and recommendation by a special committee of independent Directors. As of December 31, 2012, under existing plan that expires June 30, 2013, BancShares had the ability to purchase 43,724 and 24,900 shares of Class A and Class B common stock, respectively.

BancShares purchased 112,471 shares of Class A common stock and 37,863 shares of Class B common stock during 2011. BancShares did not issue or sell any Class A or Class B common stock during 2012 or 2011.

The Board of Directors of FCB may declare a dividend on a portion of its undivided profits as it deems appropriate, subject to the requirements of the FDIC and the General Statutes of North Carolina, without prior regulatory approval. As of December 31, 2012, the amount was $1,382,080. However, to preserve its well-capitalized status, the maximum amount of the dividend was limited to $809,000. Dividends declared by FCB amounted to $179,588 in 2012, $82,812 in 2011 and $50,424 in 2010.

BancShares and FCB are subject to various requirements imposed by state and federal banking statutes and regulations, including regulations requiring the maintenance of noninterest-bearing reserve balances at the Federal Reserve Bank. Banks are allowed to reduce the required balances by the amount of vault cash. For 2012, the requirements averaged $290,968.