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Stockholders' Equity and Regulatory Capital
 12 Months Ended
Dec. 31, 2013
Regulatory Capital Requirements [Abstract]  
Stockholders' Equity and Regulatory Capital
Stockholders’ Equity and Regulatory Capital
On June 5, 2008, the Board of Directors declared a dividend of one common share purchase right for each outstanding share of common stock, $0.01 par value per share (common shares), of the Corporation. The dividend was paid on July 15, 2008. Each right entitles the registered holder to purchase from the Corporation one-half of one common share, at a price of $85.00 per full common share (equivalent to $42.50 for each one-half of a common share), subject to adjustment. The rights will be exercisable only if a person or group acquires 15% or more of the Corporation’s common stock or announces a tender offer for such stock. Under conditions described in the Shareholder Rights Plan, holders of rights may acquire additional shares of the Corporation’s common stock. The value of shares acquired under the plan would have a market value of two times the then-current per share purchase price. The rights will expire on June 5, 2018.
The Corporation and the Banks are subject to various regulatory capital requirements administered by Federal and State of Wisconsin banking agencies. Failure to meet minimum capital requirements can result in certain mandatory, and possibly additional discretionary actions on the part of regulators, that if undertaken, could have a direct material effect on the Banks’ assets, liabilities and certain off-balance-sheet items as calculated under regulatory practices. The Corporation’s and the Banks’ capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. The Corporation continuously reviews and updates when appropriate its Capital and Liquidity Action Plan (the “Capital Plan”), which is designed to help ensure appropriate capital adequacy, to plan for future capital needs and to ensure that the Corporation serves as a source of financial strength to the Banks. The Corporation’s and the Banks’ Boards of Directors and management teams adhere to the appropriate regulatory guidelines on decisions which affect their capital position, including but not limited to, decisions relating to the payment of dividends and increasing indebtedness.
As a bank holding company, the Corporation’s ability to pay dividends is affected by the policies and enforcement powers of the Federal Reserve. Federal Reserve guidance urges companies to strongly consider eliminating, deferring or significantly reducing dividends if: (i) net income available to common shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividend; (ii) the prospective rate of earnings retention is not consistent with the bank holding company’s capital needs and overall current prospective financial condition; or (iii) the bank holding company will not meet, or is in danger of not meeting, its minimum regulatory capital ratios. Management intends, when appropriate under regulatory guidelines, to consult with the Federal Reserve Bank of Chicago and provide it with information on the Corporation’s then-current and prospective earnings and capital position in advance of declaring any cash dividends.
The Banks are also subject to certain legal, regulatory and other restrictions on their ability to pay dividends to the Corporation. As a bank holding company, the payment of dividends by the Banks to the Corporation is one of the sources of funds the Corporation could use to pay dividends, if any, in the future and to make other payments. Future dividend decisions by the Banks and the Corporation will continue to be subject to compliance with various legal, regulatory and other restrictions as defined from time to time.
Qualitative measures established by regulation to ensure capital adequacy require the Corporation and the Banks to maintain minimum amounts and ratios of Total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Tier 1 capital generally consists of stockholders’ equity plus certain qualifying debentures and other specified items less intangible assets such as goodwill. Risk-based capital requirements presently address credit risk related to both recorded and off-balance-sheet commitments and obligations. Management believes, as of December 31, 2013, that the Corporation and the Banks met all applicable capital adequacy requirements.

As of December 31, 2013, the most recent notification from the FDIC and the WDFI categorized the Banks as well capitalized under the regulatory framework for prompt corrective action.

The following table summarizes the Corporation’s and Banks’ capital ratios and the ratios required by their federal regulators at December 31, 2013 and 2012, respectively:
 
 
 
Actual
 
Minimum Required for  Capital
Adequacy Purposes
 
Minimum Required to Be Well
Capitalized Under Prompt
Corrective Action
Requirements
 
 
Amount
 
Ratio
 
Amount
 
Ratio
 
Amount
 
Ratio
 
 
(Dollars In Thousands)
As of December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
Total capital
(to risk-weighted assets)
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
145,352

 
13.16
%
 
$
88,373

 
8.00
%
 
N/A

 
N/A

First Business Bank
 
123,331

 
12.57

 
78,516

 
8.00

 
$
98,145

 
10.00
%
First Business Bank – Milwaukee
 
17,944

 
14.66

 
9,790

 
8.00

 
12,238

 
10.00

Tier 1 capital
(to risk-weighted assets)
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
119,617

 
10.83

 
$
44,186

 
4.00

 
N/A

 
N/A

First Business Bank
 
111,062

 
11.32

 
39,258

 
4.00

 
$
58,887

 
6.00

First Business Bank – Milwaukee
 
16,414

 
13.41

 
4,895

 
4.00

 
7,343

 
6.00

Tier 1 capital
(to average assets)
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
119,617

 
9.35

 
$
51,153

 
4.00

 
N/A

 
N/A

First Business Bank
 
111,062

 
10.35

 
42,913

 
4.00

 
$
53,641

 
5.00

First Business Bank – Milwaukee
 
16,414

 
7.64

 
8,595

 
4.00

 
10,744

 
5.00


 
 
Actual
 
Minimum Required for  Capital
Adequacy Purposes
 
Minimum Required to Be Well
Capitalized Under Prompt
Corrective Action
Requirements
 
 
Amount
 
Ratio
 
Amount
 
Ratio
 
Amount
 
Ratio
 
 
(Dollars In Thousands)
As of December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
Total capital
(to risk-weighted assets)
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
132,042

 
12.97
%
 
$
81,452

 
8.00
%
 
N/A

 
N/A

First Business Bank
 
115,613

 
12.73

 
72,640

 
8.00

 
$
90,800

 
10.00
%
First Business Bank – Milwaukee
 
15,743

 
14.60

 
8,626

 
8.00

 
10,783

 
10.00

Tier 1 capital
(to risk-weighted assets)
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
107,356

 
10.54

 
$
40,726

 
4.00

 
N/A

 
N/A

First Business Bank
 
104,232

 
11.48

 
36,320

 
4.00

 
$
54,480

 
6.00

First Business Bank – Milwaukee
 
14,392

 
13.35

 
4,313

 
4.00

 
6,470

 
6.00

Tier 1 capital
(to average assets)
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
107,356

 
8.99

 
$
47,750

 
4.00

 
N/A

 
N/A

First Business Bank
 
104,232

 
10.49

 
39,731

 
4.00

 
$
49,664

 
5.00

First Business Bank – Milwaukee
 
14,392

 
6.72

 
8,563

 
4.00

 
10,703

 
5.00



The following table reconciles stockholders’ equity to federal regulatory capital at December 31, 2013 and 2012, respectively.
 
 
 
As of December 31,
 
 
2013
 
2012
 
 
(In Thousands)
Stockholders’ equity of the Corporation
 
$
109,275

 
$
99,539

Unrealized and accumulated losses (gains) on specific items
 
342

 
(2,183
)
Trust preferred securities
 
10,000

 
10,000

Tier 1 capital
 
119,617

 
107,356

Allowable general valuation allowances and subordinated debt
 
25,735

 
24,686

Risk-based capital
 
$
145,352

 
$
132,042