Note 10 - Regulatory Matters

3 Months Ended

Mar. 31, 2013

Regulatory Capital Requirements under Banking Regulations [Text Block]

10.      REGULATORY MATTERS

The Bank is subject to various regulatory capital requirements administered by the Office of the Comptroller of the Currency (“OCC”), as successor to the Office of Thrift Supervision (“OTS”). Failure to meet minimum capital requirements can result in certain mandatory—and possible additional discretionary—actions by regulators that, if undertaken, could have a direct and material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.   

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of tangible capital (as defined) to tangible assets (as defined) and core capital (as defined) to adjusted tangible assets (as defined), and of total risk-based capital (as defined) to risk-weighted assets (as defined).   Tier 1 (core) capital includes common stockholders’ equity less certain other deductions.  Total capital includes Tier 1 capital plus the ALLL, subject to limitations.

On January 15, 2013, the OCC issued an order terminating, effective immediately, the Cease and Desist Order issued by the OTS on April 12, 2010 (the "Bank Order"). The action also terminates the related Stipulation and Consent to Issuance of Order to Cease and Desist between the Bank and the OTS.

As of December 31, 2012, the regulators categorized the Bank as adequately capitalized under the regulatory framework for prompt corrective action, due to the Bank Order.  The termination of the Bank Order subsequent to December 31, 2012, allowed the Bank to be eligible to be categorized as well-capitalized. On January 15, 2013, the Bank agreed with the OCC to maintain a minimum Tier 1 (core) capital ratio of at least 8% of adjusted total assets and a total risk-based capital ratio of at least 12% of risk-weighted assets.

The Bank’s actual and required capital amounts (in thousands) and ratios are presented in the following table:

	Actual					For Capital Adequacy Purposes					To be Categorized as Well Capitalized Under Prompt Corrective Action Provisions (1)					Other Requirements (2)
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
As of March 31, 2013:
Tangible Capital to Tangible Assets	$	69,714		12.75	%	$	8,201		1.50	%		N/A		N/A			N/A		N/A
Core Capital to Adjusted Tangible Assets		69,714		12.75	%		21,870		4.00	%	$	21,870		4.00	%		43,740		8.00	%
Total Capital to Risk-Weighted Assets		74,370		20.57	%		28,926		8.00	%		28,926		8.00	%		43,388		12.00	%
Tier I Capital to Risk-Weighted Assets		69,714		19.28	%		N/A		N/A			14,463		4.00	%		N/A		N/A
As of December 31, 2012:
Tangible Capital to Tangible Assets	$	67,434		12.73	%	$	7,944		1.50	%		N/A		N/A			N/A		N/A
Core Capital to Adjusted Tangible Assets		67,434		12.73	%		21,185		4.00	%	$	21,185		4.00	%		42,371		8.00	%
Total Capital to Risk-Weighted Assets		72,131		19.77	%		29,182		8.00	%		29,182		8.00	%		43,773		12.00	%
Tier I Capital to Risk-Weighted Assets		67,434		18.49	%		N/A		N/A			14,591		4.00	%		N/A		N/A

(1) Effective with the termination of the Bank Order effective January 15, 2013, the Bank can be categorized as well-capitalized by achieving the required ratios below.

(2) The Bank Order, effective through January 15, 2013, required the Bank to maintain a Tier 1 (core) capital ratio of at least 8% and a total risk-based capital ratio of at least 12%.  After such date, the Bank agreed with the OCC to maintain a minimum Tier 1 (core) capital ratio of at least 8% of adjusted total assets and a total risk-based capital ratio of at least 12% of risk-weighted assets. The required amounts presented reflect these ratios.

Dividend Restrictions.  The Company may not declare or pay cash dividends on its shares of common stock if the effect thereof would cause the Bank’s stockholders’ equity to be reduced below applicable regulatory capital maintenance requirements for insured institutions or below the special liquidation account established by the Bank in connection with the consummation of the conversion from the mutual holding company structure May 3, 1996. In addition, federal regulations, as currently applied to the Bank, impose limitations upon payment of capital distributions to the Company.

The principal source of the Company’s revenue is dividends from the Bank.  The Company’s ability to pay dividends to stockholders depends to a large extent upon the dividends received from the Bank.  Pursuant to the Cease and Desist Order issued by the OTS (the “Company Order”) on April 12, 2010, the Company may not declare or pay any dividends or capital distributions on its common stock or repurchase such shares without the prior written non-objection of the FRB.