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Regulatory Matters
 9 Months Ended
Sep. 30, 2012
Federal Home Loan Bank Advances/Regulatory Matters [Abstract]  
REGULATORY MATTERS
12. 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 our 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 September 30, 2012 and December 31, 2011, our bank was in the well capitalized category under the regulatory framework for prompt corrective action. There are no conditions or events since September 30, 2012 that we believe have changed our bank’s categorization.

Our actual capital levels (dollars in thousands) and the minimum levels required to be categorized as adequately and well capitalized were:

 

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

September 30, 2012

                                                

Total capital (to risk weighted assets)

                                                

Consolidated

   $ 170,873       14.6 %    $ 93,605       8.0 %    $ NA       NA  

Bank

     169,859       14.5       93,479       8.0       116,848       10.0 % 

Tier 1 capital (to risk weighted assets)

                                                

Consolidated

     156,087       13.3       46,803       4.0       NA       NA  

Bank

     155,092       13.3       46,740       4.0       70,109       6.0  

Tier 1 capital (to average assets)

                                                

Consolidated

     156,087       11.4       54,763       4.0       NA       NA  

Bank

     155,092       11.3       54,694       4.0       68,367       5.0  
             

December 31, 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  

 

Our consolidated capital levels as of September 30, 2012 and December 31, 2011 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 our 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. As of September 30, 2012 and December 31, 2011, all $32.0 million of the trust preferred securities were included in our consolidated Tier 1 capital.

Our and our bank’s ability to pay cash and stock dividends is subject to limitations under various laws and regulations and to prudent and sound banking practices. On October 11, 2012, our Board of Directors declared a cash dividend on our common stock in the amount of $0.09 per share, to be paid on December 10, 2012 to shareholders of record as of November 9, 2012. This represents our first common stock cash dividend since the first quarter of 2010, as in April 2010 we had suspended payments of cash dividends on our common stock.

In conjunction with our second quarter 2012 repurchase of the non-voting preferred stock issued in May 2009 to the U.S. Department of the Treasury under the Treasury’s Capital Purchase Program, as part of the Troubled Asset Relief Program, on June 29, 2012, we announced via a Form 8-K filed with the SEC that on June 27, 2012, we reached an agreement with the U.S. Department of the Treasury for repurchasing the warrant we had issued to it on May 15, 2009 in connection with our participation in the Capital Purchase Program. The warrant provided the U.S. Department of the Treasury with the right to purchase 616,438 shares of our common stock at a price of $5.11 per share. Under the agreement, we agreed to repurchase the warrant from the U.S. Department of the Treasury for approximately $7.5 million. The repurchase of the warrant was consummated on July 3, 2012. To fund the repurchase, our bank paid us a cash dividend of $7.8 million on July 2, 2012. As part of the repurchase, we recorded a reduction of retained earnings of approximately $7.5 million on July 3, 2012.