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Regulatory Matters
 12 Months Ended
Dec. 31, 2011
Deposits, Federal Home Loan Bank Advances/ Regulatory Matters [Abstract]  
REGULATORY MATTERS

NOTE 18 – REGULATORY MATTERS

We are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors, and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If an institution is not well capitalized, regulatory approval is required to accept brokered deposits. Subject to limited exceptions, no institution may make a capital distribution if, after making the distribution, it would be undercapitalized. If an institution is undercapitalized, it is subject to close monitoring by its principal federal regulator, its asset growth and expansion are restricted, and plans for capital restoration are required. In addition, further specific types of restrictions may be imposed on the institution at the discretion of the federal regulator. At year-end 2011 and 2010, our Bank was in the well capitalized category under the regulatory framework for prompt corrective action. There are no conditions or events since December 31, 2011 that we believe has changed our Bank’s categorization.

 

Our actual capital levels (dollars in thousands) and minimum required levels were:

 

                                                 
    Actual     Minimum Required
for Capital
Adequacy Purposes		     Minimum Required
to be Well
Capitalized Under
Prompt Corrective
Action Regulations		  
    Amount     Ratio     Amount     Ratio     Amount     Ratio  

2011

                                                

Total capital (to risk weighted assets)

                                                

Consolidated

   $ 187,940       15.5 %    $ 97,237       8.0 %    $ NA       NA  

Bank

     188,378       15.5       97,203       8.0       121,504       10.0 % 

Tier 1 capital (to risk weighted assets)

                                                

Consolidated

     172,469       14.2       48,619       4.0       NA       NA  

Bank

     172,910       14.2       48,602       4.0       72,902       6.0  

Tier 1 capital (to average assets)

                                                

Consolidated

     172,469       12.1       57,072       4.0       NA       NA  

Bank

     172,910       12.1       57,199       4.0       71,499       5.0  

2010

                                                

Total capital (to risk weighted assets)

                                                

Consolidated

   $ 175,029       12.5 %    $ 112,480       8.0 %    $ NA       NA  

Bank

     175,122       12.5       112,398       8.0       140,497       10.0 % 

Tier 1 capital (to risk weighted assets)

                                                

Consolidated

     157,111       11.2       56,240       4.0       NA       NA  

Bank

     157,217       11.2       56,199       4.0       84,299       6.0  

Tier 1 capital (to average assets)

                                                

Consolidated

     157,111       9.1       69,135       4.0       NA       NA  

Bank

     157,217       9.1       69,112       4.0       86,389       5.0  

Federal and state banking laws and regulations place certain restrictions on the amount of dividends our Bank can transfer to Mercantile and on the capital levels that must be maintained. At year-end 2011, under the most restrictive of these regulations (to remain well capitalized), our Bank could distribute approximately $61.9 million to Mercantile as dividends without prior regulatory approval.

 

Our consolidated capital levels as of December 31, 2011 and December 31, 2010 include $32.0 million of trust preferred securities issued by the trust in September 2004 and December 2004 subject to certain limitations. Under applicable Federal Reserve guidelines, the trust preferred securities constitute a restricted core capital element. The guidelines provide that the aggregate amount of restricted core elements that may be included in Tier 1 capital must not exceed 25% of the sum of all core capital elements, including restricted core capital elements, net of goodwill less any associated deferred tax liability. Our ability to include the trust preferred securities in Tier 1 capital in accordance with the guidelines is not affected by the provision of the Dodd-Frank Act generally restricting such treatment, because (i) the trust preferred securities were issued before May 19, 2010, and (ii) our total consolidated assets as of December 31, 2009 were less than $15.0 billion. At December 31, 2011 and December 31, 2010, all $32.0 million of the trust preferred securities were included as Tier 1 capital of Mercantile.