Shareholders' Equity, Dividends Restrictions and Other Regulatory Matters

12 Months Ended

Dec. 31, 2016

Regulatory Capital Requirements [Abstract]

Shareholders' Equity, Dividend Restrictions and Other Regulatory Matters

SHAREHOLDERS' EQUITY, DIVIDEND RESTRICTIONS AND OTHER REGULATORY MATTERS

BancShares and FCB are required to meet minimum capital requirements set forth by regulatory authorities. Bank regulatory agencies approved regulatory capital guidelines (Basel III) aimed at strengthening existing capital requirements for banking organizations. Under Basel III, requirements include a common equity Tier 1 ratio minimum of 4.50 percent, Tier 1 risk-based capital minimum of 6.00 percent, total risk-based capital ratio minimum of 8.00 percent and Tier 1 leverage capital ratio minimum of 4.00 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. A new capital conservation buffer, comprised of common equity Tier 1 capital, was also established above the regulatory minimum requirements. This capital conservation buffer was phased in beginning January 1, 2016 at 0.625 percent of risk-weighted assets and will increase each subsequent year by an additional 0.625 percent until reaching its final level of 2.50 percent on January 1, 2019. Basel III became effective for BancShares on January 1, 2015, with full compliance of all Basel III requirements phased in over a multi-year schedule, to be fully phased in by January 1, 2019.

Based on the most recent notifications from its regulators, FCB is well-capitalized under the regulatory framework for prompt corrective action. As of December 31, 2016, BancShares and FCB met all capital adequacy requirements to which they are subject and were not aware of any conditions or events that would affect each entity's well-capitalized status.

Following is an analysis of capital ratios under Basel III guidelines for BancShares and FCB as of December 31, 2016 and 2015:

	December 31, 2016						December 31, 2015
(Dollars in thousands)	Amount		Ratio		Requirements to be well-capitalized		Amount		Ratio		Requirements to be well-capitalized
BancShares
Tier 1 risk-based capital	$	2,995,557	12.42	%	8.00	%	$	2,831,242	12.65	%	8.00	%
Common equity Tier 1	2,995,557		12.42		6.50		2,799,163		12.51		6.50
Total risk-based capital	3,339,986		13.85		10.00		3,140,212		14.03		10.00
Leverage capital	2,995,557		9.05		5.00		2,831,242		8.96		5.00
FCB
Tier 1 risk-based capital	2,942,829		12.25		8.00		2,821,475		12.64		8.00
Common equity Tier 1	2,942,829		12.25		6.50		2,821,475		12.64		6.50
Total risk-based capital	3,172,757		13.21		10.00		3,038,070		13.61		10.00
Leverage capital	2,942,829		8.94		5.00		2,821,475		8.95		5.00

BancShares and FCB had capital conservation buffers above minimum risk-based capital requirements of 5.85 percent and 5.21 percent, respectively, at December 31, 2016. The buffers exceed the 0.625 percent requirement and, therefore, result in no limit on distributions.

At December 31, 2016, BancShares had no trust preferred capital securities included in Tier 1 capital, compared to $32.1 million at December 31, 2015. Effective January 1, 2015, 75 percent of BancShares' trust preferred capital securities were excluded from Tier 1 capital and the remaining 25 percent were phased out January 1, 2016 under Basel III requirements. Management continues to monitor developments and remains committed to managing capital levels in a prudent manner.

At December 31, 2016 and December 31, 2015, Tier 2 capital of BancShares included $3.0 million and $6.0 million, respectively, of qualifying subordinated debt with a scheduled maturity date of June 1, 2018. 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.

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 2016, our Board approved a stock repurchase plan that provides for the purchase of up to 200,000 shares of Class A common stock. The shares may be purchased from time to time from November 1, 2016 through October 31, 2017. That authority replaced a similar plan in effect during the twelve months preceding November 1, 2016. The Board's action approving share purchases does not obligate BancShares to acquire any particular amount of shares and purchases may be suspended or discontinued at any time. Any shares of stock that are purchased will be canceled. As of December 31, 2016, no purchases had occurred pursuant to either authorization.

The Board of Directors of FCB may approve distributions, including dividends, as it deems appropriate, subject to the requirements of the FDIC and the General Statutes of North Carolina, provided that the distributions do not reduce capital below applicable capital requirements. As of December 31, 2016, the maximum amount of the dividend was limited to $928.7 million to preserve well-capitalized status. Dividends declared by FCB and paid to BancShares amounted to $90.1 million in 2016, $75.0 million in 2015 and $30.0 million in 2014.

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 2016, the requirements averaged $575.7 million.