| Stockholders' Equity | NOTE 10 – Stockholders’ Equity Stockholders’ Equity On July 29, 2014, the Company’s Board of Directors approved a new stock repurchase plan to replace the 2007 Repurchase Plan (the “2014 Repurchase Plan”). Under the 2014 Repurchase Plan, the Company is authorized to repurchase up to $15 million in value of its outstanding shares of common stock . This authority may be exercised from time to time and in such amounts as market conditions warrant. Any shares purchased under this plan are returned to the s tatus of authorized but unissued shares of common stock. The repurchases may be made on the open market, in block trades or otherwise. The program may be suspended or discontinued at any time. The repurchases are funded using the Company’s working capital. During the three months ended March 31, 2016 , the Company did not repurchase any of its common stock under the 2014 Repurchase Plan in the open market. T he Company purchased 112,129 shares of its common stock in the open market under the 2014 Repurchase Plan at an average cost of $ 18.45 per share during the three-month period ended March 31, 2015 . At March 31, 2016 , the Company had $ 3.2 million remaining in the 2014 Repurchase Plan . In addition to the repurchases described above, participants in the Company’s 2014 Equity Compensation Plan (approved by the Company’s shareholders on June 3, 2014) (the “2014 Plan”) may ha ve shares withheld to cover income taxes. During the three-month period s ended March 31, 2016 and March 31, 2015 , t here were 21,448 shares and 33,186 shares repurchased to cover income tax withholding in connection with shares granted unde r the 2014 Plan at an average cost of $ 14.44 per share and $ 18.27 per share , respectively. Regulatory Capital Requirements Through its issuance of FDIC-insured deposit s , MBB serves as the Company’s primary funding source. Over time, MBB may offer other products and services to the Company’s customer base. MBB operates as a Utah state-chartered, Federal Reserve member commercial bank, insured by the FDIC. As a state-chartered Federal Reserve member bank, MBB is supervised by both the Federal Reserve Bank of San Francisco and the Utah Department of Financial Institutions. The Comp any and MBB are subject to capital adequacy regulations issued jointly by the federal bank regulatory agencies. These risk-based capital and leverage guidelines make regulatory capital requirements more sensitive to differences in risk profiles among banki ng organizations and consider off-balance sheet exposures in determining capital adequacy. The federal bank regulatory agencies and/or the U.S. Congress may determine to increase capital requirements in the future due to the current economic environment. U nder the capital adequacy regulation, at least half of a banking organization’s total capital is required to be "Tier 1 Capital" as defined in the regulations, comprised of common equity, retained earnings and a limited amount of non-cumulative perpetual p referred stock. The remaining capital, "Tier 2 Capital," as defined in the regulations, may consist of other preferred stock, a limited amount of term subordinated debt or a limited amount of the reserve for possible credit losses. The regulations establis h minimum leverage ratios for banking organizations, which are calculated by dividing Tier 1 Capital by total quarterly average assets. Recognizing that the risk-based capital standards principally address credit risk rather than interest rate, liquidity, operational or other risks, many banking organizations are expected to maintain capital in excess of the minimum standards. On January 1, 2015, the Company and MBB became subject to new capital adequacy standards under the Basel III rules . The new standards require a minimum for Tier 1 leverage ratio of 4% . The new standards raised the required minimum Tier 1 risk-based ratio from 4% to 6%. The t otal risk-based capital ratio of 8% did not change. The new capital adequacy standards establish a new common equity Tier 1 risk-based capital ratio with a required 4.5% minimum (6.5% to be considered well-capitaliz ed). There is also a new capital conservation buffer which is phased in from 2015 to 2019. When added to the minimum capital ratios and fully phased in, the capital conservation buffer will require banking organizations to hold an additional 2.5% of capi tal above the minimum requirements. If a banking organization does not maintain capital above the minimum plus the capital conservation buffer it may be subject to restrictions on dividends, share buybacks, and certain discretionary payments such as bonus payments. The Company plans to provide the necessary capital to maintain MBB at “well-capitalized” status as defined by banking regulations and as required by an agreement entered into by and among MBB, MLC, Marlin Business Services Corp. and the FDIC i n conjunction with the opening of MBB (the “FDIC Agreement”) . MBB’s Tier 1 Capital balance at March 31, 2016 was $128.1 million, which met all capital requirements to which MBB is subject and qualified MBB for “well-capitalized” status. At March 31, 2016 , the Company also exceeded its regulatory capital requirements and was considered “well-capitalized” as defined by federal banking regulations and as required by the FDIC Agreement . The following table sets forth the Tier 1 leverage ratio, common equity Tier 1 risk-based capital ratio, Tier 1 risk-based capital ratio and total risk-based capital ratio for Marlin Business Services Corp. and MBB at March 31, 2016 . Minimum Capital Well-Capitalized Capital Actual Requirement Requirement Ratio Amount Ratio (1) Amount Ratio Amount (Dollars in thousands) Tier 1 Leverage Capital Marlin Business Services Corp. 19.39% $ 152,509 4% $ 31,467 5% $ 39,333 Marlin Business Bank 17.03% $ 128,145 5% $ 37,629 5% $ 37,629 Common Equity Tier 1 Risk-Based Capital Marlin Business Services Corp. 20.51% $ 152,509 4.5% $ 33,469 6.5% $ 48,344 Marlin Business Bank 17.73% $ 128,145 6.5% $ 46,970 6.5% $ 46,970 Tier 1 Risk-based Capital Marlin Business Services Corp. 20.51% $ 152,509 6% $ 44,625 8% $ 59,500 Marlin Business Bank 17.73% $ 128,145 8% $ 57,810 8% $ 57,810 Total Risk-based Capital Marlin Business Services Corp. 21.74% $ 161,700 8% $ 59,500 10% $ 74,375 Marlin Business Bank 18.98% $ 137,179 15% $ 108,393 10% (1) $ 72,262 __________________ (1 ) MBB is required to maintain “well-capitalized” status and must also maintain a total risk-based capital ratio greater than 15% pursuant to the FDIC Agreement. Prompt Corrective Action . The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) requires the federal regulators to take prompt corrective action against any undercapitalized institution. Five capital categories have been established under federal banking regulations : well-capitalized, adequately cap italized, undercapitalized, significantly undercapitalized and critically undercapitalized. Well-capitalized institutions significantly exceed the required minimum level for each relevant capital measure. Adequately capitalized institutions include depos itory institutions that meet but do not significantly exceed the required minimum level for each relevant capital measure. Undercapitalized institutions consist of those that fail to meet the required minimum level for one or more relevant capital measures . Significantly undercapitalized characterizes depository institutions with capital levels significantly below the minimum requirements for any relevant capital measure. Critically undercapitalized refers to depository institutions with minimal capital a nd at serious risk for government seizure. Under certain circumstances, a well-capitalized, adequately capitalized or undercapitalized institution may be treated as if the institution were in the next lower capital category. A depository institution is g enerally prohibited from making capital distributions, including paying dividends, or paying management fees to a holding company if the institution would thereafter be undercapitalized. Institutions that are adequately capitalized but not well-capitalize d cannot accept, renew or roll over brokered deposits except with a waiver from the FDIC and are subject to restrictions on the interest rates that can be paid on such deposits. Undercapitalized institutions may not accept, renew or roll over brokered depo sits. The federal bank regulatory agencies are permitted or, in certain cases, required to take certain actions with respect to institutions falling within one of the three undercapitalized categories. Depending on the level of an institution’s capital, the agency’s corrective powers include, among other things: • prohibiting the payment of principal and interest on subordinated debt; • prohibiting the holding company from making distributions without prior regulatory approval; • placing limits on asset growth and restrictions on activities; • placing additional restrictions on transactions with affiliates; • restricting the interest rate the institution may pay on deposits; • prohibiting the institution from accepting deposits from correspondent banks; and • in the most severe cases, appointing a conservator or receiver for the institution. A banking institution that is undercapitalized is required to submit a capital restoration plan, and such a plan will not be accepted unless, among other things, the banking institution’s holding company guarantees the plan up to a certain specified amount. Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy. Pursuant to the FDIC Agreement entered in to in conjunction with the opening of MBB, MBB must keep its total risk-based capital ratio above 15%. MBB’s total risk-based capital ratio of 18.98% at March 31, 2016 exceeded the threshold for “well capitalized” status under the applicable laws a nd regulations, and also exceeded the 15 % minimum total risk-based capital ratio required in the FDIC Agreement. Dividends . The Federal Reserve Board has issued policy statements requiring insured banks and bank holding companies to have an established a ssessment process for maintaining capital commensurate with their overall risk profile. Such assessment process may affect the ability of the organizations to pay dividends. Although generally organizations may pay dividends only out of current operating e arnings, dividends may be paid if the distribution is prudent relative to the organization’s financial position and risk profile, after consideration of current and prospective economic conditions. |
