REGULATORY CAPITAL REQUIREMENTS

12 Months Ended

Dec. 31, 2015

REGULATORY CAPITAL REQUIREMENTS

REGULATORY CAPITAL REQUIREMENTS

16. REGULATORY CAPITAL REQUIREMENTS

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital requirements that involve quantitative measures of the Company’s and Bank’s assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. The Company’s and Bank’s capital amounts and classifications also are 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 the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk weighted assets and of Tier 1 capital to average assets. Tier 1 capital, risk weighted assets and average assets are as defined by regulation. The required minimums for the Corporation and Bank are set forth in the table that follows. The Company and the Bank met all capital adequacy requirements on December 31, 2015.

On January 1, 2015, the Basel III Capital Rules became effective and include transition provisions through January 1, 2019. These rules provide for the following minimum capital to risk-weighted assets ratios as of January 1, 2015: a) 4.5% based upon common equity tier 1 capital ("CET1"); b) 6.0% based upon tier 1 capital; and c) 8.0% based upon total regulatory capital. A minimum leverage ratio (tier 1 capital as a percentage of total average assets) of 4.0% is also required under the Basel III Capital Rules.

When fully phased in, the Basel III Capital Rules will additionally require institutions to retain a capital conservation buffer, composed of CET1, of 2.5% above these required minimum capital ratio levels. The capital conservation buffer requirement is being phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increasing by 0.625% each subsequent January 1, until it reaches 2.5% on January 1, 2019. When the capital conservation buffer is fully phased in on January 1, 2019, the Company and the Bank will effectively have the following minimum capital to risk-weighted assets ratios: a) 7.0% based upon CET1; b) 8.5% based upon tier 1 capital; and c) 10.5% based upon total regulatory capital.

The Company and the Bank made the one-time, permanent election to continue to exclude the effects of accumulated other comprehensive income or loss items included in stockholders' equity for the purposes of determining the regulatory capital ratios.

As of December 31, 2015, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized,” the Bank must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. Since that notification, there are no conditions or events that management believes have changed the institution’s category.

The following table presents actual capital levels and minimum required levels for the Company and the Bank at December 31, 2015 (under Basel III rules) and December 31, 2014.

	Basel III
											Minimum To Be Well
						Minimum Capital					Capitalized Under Prompt
As of December 31, 2015	Actual					Adequacy Requirement					Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital to Risk Weighted Assets:
Consolidated	$	249,921		9.3	%	$	121,074		4.5	%		n/a		n/a
Bank		319,351		11.9			121,074		4.5		$	174,884		6.5	%
Total Capital to Risk Weighted Assets:
Consolidated		366,393		13.6			215,243		8.0			n/a		n/a
Bank		340,371		12.7			215,242		8.0			269,053		10.0
Tier 1 Capital to Risk Weighted Assets:
Consolidated		265,373		9.9			161,432		4.0			n/a		n/a
Bank		319,351		11.9			161,432		4.0			215,242		8.0
Tier 1 Capital to Average Assets:
Consolidated		265,373		7.6			140,490		4.0			n/a		n/a
Bank		319,351		9.1			140,492		4.0			175,615		5.0

	Basel I
											Minimum To Be Well
						Minimum Capital					Capitalized Under Prompt
As of December 31, 2014	Actual					Adequacy Requirement					Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Common Equity Tier 1 Capital to Risk Weighted Assets:
Consolidated		n/a		n/a			n/a		n/a			n/a		n/a
Bank		n/a		n/a			n/a		n/a			n/a		n/a
Total Capital to Risk Weighted Assets:
Consolidated	$	207,340		13.0	%	$	127,445		8.0	%		n/a		n/a
Bank		206,633		13.0			127,427		8.0		$	159,284		10.0	%
Tier 1 Capital to Risk Weighted Assets:
Consolidated		189,527		11.9			63,722		4.0			n/a		n/a
Bank		188,820		11.9			63,714		4.0			95,571		6.0
Tier 1 Capital to Average Assets:
Consolidated		189,527		8.4			90,614		4.0			n/a		n/a
Bank		188,820		8.3			90,617		4.0			113,271		5.0