NOTE 18: CAPITAL

The Company is subject to examination, regulation, and periodic reporting under the Bank Holding Company Act of 1956, as amended, which is administered by the FRB. The FRB has adopted capital adequacy guidelines for bank holding companies (on a consolidated basis) that are substantially similar to those of the FDIC for the Banks.

The following tables present the regulatory capital ratios for the Company at December 31, 2017 and 2016, in comparison with the minimum amounts and ratios required by the FRB for capital adequacy purposes:


	Risk-Based Capital
At December 31, 2017	Common Equity Tier 1					Tier 1					Total					Leverage Capital
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital	$	3,869,129		11.36	%	$	4,371,969		12.84	%	$	4,877,208		14.32	%	$	4,371,969		9.58	%
Minimum for capital adequacy purposes		1,532,448		4.50			2,043,265		6.00			2,724,353		8.00			1,826,141		4.00

Excess	$	2,336,681		6.86	%	$	2,328,704		6.84	%	$	2,152,855		6.32	%	$	2,545,828		5.58	%


	Risk-Based Capital
At December 31, 2016	Common Equity Tier 1					Tier 1					Total					Leverage Capital
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital	$	3,748,231		10.62	%	$	3,748,231		10.62	%	$	4,277,759		12.12	%	$	3,748,231		8.00	%
Minimum for capital adequacy purposes		1,588,699		4.50			2,118,266		6.00			2,824,355		8.00			1,875,062		4.00

Excess	$	2,159,532		6.12	%	$	1,629,965		4.62	%	$	1,453,404		4.12	%	$	1,873,169		4.00	%

In accordance with Basel III, the inclusion of trust preferred securities as tier 1 capital was phased out completely in 2016.

In addition, Basel III calls for the phase-in of a capital conservation buffer over a five-year period beginning with 0.625% in 2016 and reaching 2.50% in 2019, when fully phased in. At December 31, 2017, our total risk-based capital ratio exceeded the minimum requirement for capital adequacy purposes by 632 basis points and the fully phased-in capital conservation buffer by 382 basis points.

The Banks are subject to regulation, examination, and supervision by the NYSDFS and the FDIC (the “Regulators”). The Banks are also governed by numerous federal and state laws and regulations, including the FDIC Improvement Act of 1991, which established five categories of capital adequacy ranging from “well capitalized” to “critically undercapitalized.” Such classifications are used by the FDIC to determine various matters, including prompt corrective action and each institution’s FDIC deposit insurance premium assessments. Capital amounts and classifications are also subject to the Regulators’ qualitative judgments about the components of capital and risk weightings, among other factors.

The quantitative measures established to ensure capital adequacy require that banks maintain minimum amounts and ratios of leverage capital to average assets and of common equity tier 1 capital, tier 1 capital, and total capital to risk-weighted assets (as such measures are defined in the regulations). At December 31, 2017, the Banks exceeded all the capital adequacy requirements to which they were subject.

As of December 31, 2017, the Company, the Community Bank, and the Commercial Bank are categorized as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as well capitalized, a bank must maintain a minimum common equity tier 1 risk-based capital ratio of 6.50%; a minimum tier 1 risk-based capital ratio of 8.00%; a minimum total risk-based capital ratio of 10.00%; and a minimum leverage capital ratio of 5.00%. In the opinion of management, no conditions or events have transpired since December 31, 2017 to change these capital adequacy classifications.

The following tables present the actual capital amounts and ratios for the Community Bank at December 31, 2017 and 2016 in comparison to the minimum amounts and ratios required for capital adequacy purposes.


	Risk-Based Capital
At December 31, 2017	Common Equity Tier 1					Tier 1					Total					Leverage Capital
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital	$	4,253,233		13.43	%	$	4,253,233		13.43	%	$	4,387,620		13.86	%	$	4,253,233		10.06	%
Minimum for capital adequacy purposes		1,424,795		4.50			1,899,727		6.00			2,532,969		8.00			1,691,041		4.00

Excess	$	2,828,438		8.93	%	$	2,353,506		7.43	%	$	1,854,651		5.86	%	$	2,562,192		6.06	%


	Risk-Based Capital
At December 31, 2016	Common Equity Tier 1					Tier 1					Total					Leverage Capital
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital	$	3,686,510		11.23	%	$	3,686,510		11.23	%	$	3,843,382		11.71	%	$	3,686,510		8.45	%
Minimum for capital adequacy purposes		1,477,056		4.50			1,969,408		6.00			2,625,877		8.00			1,744,601		4.00

Excess	$	2,209,454		6.73	%	$	1,717,102		5.23	%	$	1,217,505		3.71	%	$	1,941,909		4.45	%

The following tables present the actual capital amounts and ratios for the Commercial Bank at December 31, 2017 and 2016 in comparison to the minimum amounts and ratios required for capital adequacy purposes:


	Risk-Based Capital
At December 31, 2017	Common Equity Tier 1					Tier 1					Total					Leverage Capital
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital	$	380,194		15.95	%	$	380,194		15.95	%	$	404,643		16.97	%	$	380,194		11.37	%
Minimum for capital adequacy purposes		107,285		4.50			143,047		6.00			190,729		8.00			133,801		4.00

Excess	$	272,909		11.45	%	$	237,147		9.95	%	$	213,914		8.97	%	$	246,393		7.37	%


	Risk-Based Capital
At December 31, 2016	Common Equity Tier 1					Tier 1					Total					Leverage Capital
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital	$	370,707		14.14	%	$	370,707		14.14	%	$	397,259		15.15	%	$	370,707		10.53	%
Minimum for capital adequacy purposes		117,973		4.50			157,297		6.00			209,729		8.00			140,813		4.00

Excess	$	252,734		9.64	%	$	213,410		8.14	%	$	187,530		7.15	%	$	229,894		6.53	%

On March 17, 2017, the Company issued 20,600,000 depositary shares, each representing a 1/40th interest in a share of the Company’s Fixed-to-Floating Rate Series A Noncumulative Perpetual Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share (equivalent to $25 per depositary share). Dividends will accrue on the depositary shares at a fixed rate equal to 6.375% per annum until March 17, 2027, and a floating rate equal to Three-month LIBOR plus 382.1 basis points per annum beginning on March 17, 2027. Dividends will be payable in arrears on March 17, June 17, September 17, and December 17 of each year, which commenced on June 17, 2017.