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Note 21 - Regulatory Matters
 12 Months Ended
Dec. 31, 2014
Disclosure Text Block [Abstract]  
Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 21 - 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 2014 and 2013, 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, 2014 that we believe have changed our Bank’s categorization.


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

 
                                                 

2014

                                               

Total capital (to risk weighted assets)

                                               

Consolidated

  $ 334,793       14.4 %   $ 185,553       8.0 %   $ NA       NA  

Bank

    332,749       14.4       185,309       8.0       231,636       10.0 %

Tier 1 capital (to risk weighted assets)

                                               

Consolidated

    314,752       13.6       92,777       4.0       NA       NA  

Bank

    312,708       13.5       92,655       4.0       138,982       6.0  

Tier 1 capital (to average assets)

                                               

Consolidated

    314,752       11.2       112,949       4.0       NA       NA  

Bank

    312,708       11.1       112,856       4.0       141,070       5.0  
                                                 

2013

                                               

Total capital (to risk weighted assets)

                                               

Consolidated

  $ 193,925       15.9 %   $ 97,498       8.0 %   $ NA       NA  

Bank

    190,493       15.7       97,329       8.0       121,662       10.0 %

Tier 1 capital (to risk weighted assets)

                                               

Consolidated

    178,598       14.7       48,749       4.0       NA       NA  

Bank

    175,192       14.4       48,665       4.0       72,997       6.0  

Tier 1 capital (to average assets)

                                               

Consolidated

    178,598       12.5       57,006       4.0       NA       NA  

Bank

    175,192       12.3       56,860       4.0       71,075       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 2014, under the most restrictive of these regulations, our Bank could distribute approximately $87.7 million to Mercantile as dividends without prior regulatory approval.


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 January 16, 2014, our Board of Directors declared a cash dividend on our common stock in the amount of $0.12 per share that was paid on March 10, 2014 to shareholders of record as of February 10, 2014. On May 9, 2014, our Board of Directors declared a cash dividend on our common stock in the amount of $0.12 per share that was paid on June 25, 2014 to shareholders of record as of June 13, 2014. On July 17, 2014, our Board of Directors declared a cash dividend on our common stock in the amount of $0.12 per share that was paid on September 24, 2014 to shareholders of record as of September 12, 2014. On October 16, 2014, our Board of Directors declared a cash dividend on our common stock in the amount of $0.12 per share that was paid on December 24, 2014 to shareholders of record as of December 12, 2014. In addition, on May 9, 2014, our Board of Directors declared a special cash dividend on our common stock in the amount of $2.00 per share that was paid on May 29, 2014 to shareholders of record as of May 22, 2014. The special cash dividend, in contemplation of the plan of merger with Firstbank, was paid to Mercantile shareholders prior to the effective date of the merger with Firstbank and before the issuance of Mercantile shares in exchange for Firstbank shares.


On January 15, 2015, our Board of Directors declared a cash dividend on our common stock in the amount of $0.14 per share that will be paid on March 25, 2015 to shareholders of record as of March 13, 2015. In addition, on January 30, 2015, we announced that our Board of Directors had authorized a new program to repurchase up to $20.0 million of our common stock from time to time in open market transactions at prevailing market prices or by other means in accordance with applicable regulations. We expect to fund a majority of such repurchases from cash dividends paid to us from our Bank.


Our consolidated capital levels as of December 31, 2014 and 2013 include $52.4 million and $32.0 million, respectively, of trust preferred securities 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, 2014 and 2013, all $52.4 million and $32.0 million, respectively, of the trust preferred securities were included as Tier 1 capital of Mercantile.