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Regulatory & Capital Matters
 3 Months Ended
Mar. 31, 2017
Regulatory & Capital Matters  
Regulatory & Capital Matters

Note 12 – Regulatory & Capital Matters

 

The Bank is subject to the risk-based capital regulatory guidelines, which include the methodology for calculating the risk-weighted Bank assets, developed by the Office of the Comptroller of the Currency (the “OCC”) and the other bank regulatory agencies.  In connection with the current economic environment, the Bank’s current level of nonperforming assets and the risk-based capital guidelines, the Bank’s Board of Directors has determined that the Bank should maintain a Tier 1 leverage capital ratio at or above eight percent (8%) and a total risk-based capital ratio at or above twelve percent (12%).  At March 31, 2017, the Bank exceeded those thresholds.

 

At March 31, 2017, the Bank’s Tier 1 capital leverage ratio was 10.14%, a decrease of 10 basis points from December 31, 2016, but well above the 8.00% objective.  The Bank’s total capital ratio was 13.33%, a decrease of 12 basis points from December 31, 2016, but also well above the objective of 12.00%.

 

Bank holding companies are required to maintain minimum levels of capital in accordance with capital guidelines implemented by the Board of Governors of the Federal Reserve System.  The general bank and holding company capital adequacy guidelines are shown in the accompanying table, as are the capital ratios of the Company and the Bank, as of March 31, 2017, and December 31, 2016.

 

In July 2013, the U.S. federal banking authorities issued final rules (the “Basel III Rules”) establishing more stringent regulatory capital requirements for U.S. banking institutions, which went into effect on January 1, 2015.  A detailed discussion of the Basel III Rules is included in Part I, Item 1 of the Company’s Form 10-K for the year ended December 31, 2016, under the heading “Supervision and Regulation.”

 

At March 31, 2017, and December 31, 2016, the Company, on a consolidated basis, exceeded the minimum thresholds to be considered “well capitalized” under current regulatory defined capital ratios.

 

Capital levels and industry defined regulatory minimum required levels are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Minimum Capital

 

To Be Well Capitalized Under

 

 

 

 

 

 

 

 

 

Adequacy with Capital

 

Prompt Corrective

 

 

 

Actual

 

Conservation Buffer if applicable1

 

Action Provisions2

 

 

    

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

 

March 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

$

153,585

 

8.42

%

 

$

104,883

 

5.750

%

 

 

N/A

 

N/A

 

Old Second Bank

 

 

227,422

 

12.46

 

 

 

104,950

 

5.750

 

 

$

118,639

 

6.50

%

Total capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

220,859

 

12.11

 

 

 

168,699

 

9.250

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

243,158

 

13.33

 

 

 

168,733

 

9.250

 

 

 

182,414

 

10.00

 

Tier 1 capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

197,997

 

10.86

 

 

 

132,180

 

7.250

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

227,422

 

12.46

 

 

 

132,328

 

7.250

 

 

 

146,017

 

8.00

 

Tier 1 capital to average assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

197,997

 

8.84

 

 

 

89,591

 

4.00

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

227,422

 

10.14

 

 

 

89,713

 

4.00

 

 

 

112,141

 

5.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common equity tier 1 capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

$

154,537

 

8.76

%

 

$

90,411

 

5.125

%

 

 

N/A

 

N/A

 

Old Second Bank

 

 

221,153

 

12.53

 

 

 

90,456

 

5.125

 

 

$

114,724

 

6.50

%

Total capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

216,768

 

12.29

 

 

 

152,126

 

8.625

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

237,305

 

13.45

 

 

 

152,176

 

8.625

 

 

 

176,435

 

10.00

 

Tier 1 capital to risk weighted assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

191,987

 

10.88

 

 

 

116,904

 

6.625

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

221,153

 

12.53

 

 

 

116,930

 

6.625

 

 

 

141,199

 

8.00

 

Tier 1 capital to average assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

191,987

 

8.90

 

 

 

86,287

 

4.00

 

 

 

N/A

 

N/A

 

Old Second Bank

 

 

221,153

 

10.24

 

 

 

86,388

 

4.00

 

 

 

107,985

 

 5.00

 

 

1  As of March 31, 2017, amounts are shown inclusive of a capital conservation buffer of 1.25%; as compared to December 31, 2016, of 0.625%.

2 The Bank exceeded the general minimum regulatory requirements to be considered “well capitalized.”

 

Dividend Restrictions

 

In addition to the above requirements, banking regulations and capital guidelines generally limit the amount of dividends that may be paid by a bank without prior regulatory approval.  Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s profits, combined with the retained profit of the previous two years, subject to the capital requirements described above.  Pursuant to the Basel III rules that came into effect January 1, 2015, the Bank must keep a buffer of 0.625% for 2016, 1.25% for 2017, 1.875% for 2018, and 2.5% for 2019 and thereafter of minimum capital requirements in order to avoid additional limitations on capital distributions.