Note 10 - Regulatory Matters

12 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

NOTE 10—REGULATORY MATTERS

The Bank is 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. Management believes as of June 30, 2016, the Bank has met all capital adequacy requirements to which it is subject.

The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, under-capitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.

As of fiscal year-end 2016 and 2015, the Corporation met the definition of a small bank holding company and, therefore, was exempt from consolidated risk-based and leverage capital adequacy guidelines for bank holding companies. The Basel III Capital Rules became effective for the Bank on January 1, 2015 and certain provisions are subject to a phase-in period. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and will be phased in over a four -year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019). The Basel III Capital Rules also provide for a “countercyclical capital buffer” that is applicable to only certain covered institutions and does not have any current applicability to the Bank.

The aforementioned capital conservation buffer is designed to absorb losses during periods of economic stress. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets above the minimum but below the conservation buffer (or below the combined capital conservation buffer and countercyclical capital buffer, when the latter is applied) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

The following table presents actual and required capital ratios as of June 30, 2016 for the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of June 30, 2016 based on the phase-in provisions of the Basel III Capital Rules. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules.

	Actual					Minimum Capital Required - Basel III					Minimum Required To Be Considered Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2016
Common equity Tier 1 to risk-weighted assets
Bank	$	39.4		13.37	%	$	15.1		5.125	%	$	19.1		6.50	%
Tier 1 capital to risk weighted assets
Bank		39.4		13.37			19.5		6.625			23.6		8.00
Total Capital to risk weighted assets
Bank		42.9		14.58			25.4		8.625			29.4		10.00
Tier 1 capital to average assets
Bank		39.4		9.25			17.0		4.00			21.3		5.00

The following table presents actual and required capital ratios as of June 30, 2015 for the Bank under the regulatory capital rules then in effect.

	Actual					Minimum Capital Required - Basel III					Minimum Required To Be Considered Well Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2015
Common equity Tier 1 to risk-weighted assets
Bank	$	38.5		14.4	%	$	12.0		4.5	%	$	17.4		6.5	%
Tier 1 capital to risk weighted assets
Bank		38.5		14.4			16.1		6.0			21.4		8.0
Total Capital to risk weighted assets
Bank		41.0		15.3			21.4		8.0			26.8		10.0
Tier 1 capital to average assets
Bank		38.5		9.5			16.2		4.0			20.2		5.0

As of the latest regulatory examination, the Bank was categorized as well capitalized. There are no conditions or events since that examination that management believes may have changed the Bank’s category.

The Corporation’s principal source of funds for dividend payment is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net profits, combined with the retained net profits of the preceding two years, subject to the capital requirements described above. As of June 30, 2016 the Bank could, without prior approval, declare a dividend of approximately $3,515.