REGULATORY RESTRICTIONS

3 Months Ended

Mar. 31, 2016

Regulatory Capital Requirements [Abstract]

REGULATORY RESTRICTIONS

REGULATORY RESTRICTIONS

North Carolina banking law requires that the Bank may not pay a dividend that would reduce its capital below the applicable required capital. In addition, regulatory authorities may limit payment of dividends by any bank when it is determined that such a limitation is in the public interest and is necessary to ensure the financial soundness of the Bank. Although not currently limited by regulatory authorities, there were no dividends paid to the Company by the Bank during the three months ended March 31, 2016.

Current federal regulations require that the Company and the Bank maintain a minimum ratio of total capital to risk weighted assets of 8.0%, with at least 6.0% being in the form of Tier 1 capital, as defined in the regulations. In addition, the Company and the Bank must maintain a common equity Tier 1 capital ratio of 4.5% and a leverage ratio of 4.0%. For the Bank to be categorized as well capitalized, the Bank must maintain minimum amounts and ratios as set forth in the table below. There is no such category for well capitalized at the Company level. At March 31, 2016, the Bank was classified as well capitalized for regulatory capital purposes.

Capital ratios for the Bank and the Company are presented in the table below.

	Actual Ratio				Minimum For Capital Adequacy Purposes		Minimum to be Well Capitalized under Prompt Corrective Action Provisions
	3/31/2016		12/31/2015		Ratio		Ratio
Bank
Total Capital (to Risk Weighted Assets)	15.5	%	15.6	%	8.0	%	10.0	%
Tier I Capital (to Risk Weighted Assets)	14.2	%	14.4	%	6.0	%	8.0	%
Common Equity Tier 1 Capital (to Risk Weighted Assets)	14.2	%	14.4	%	4.5	%	6.5	%
Tier I Capital (to Average Assets)	10.5	%	10.2	%	4.0	%	5.0	%
Company
Total Capital (to Risk Weighted Assets)	15.8	%	16.0	%	8.0	%	N/A
Tier I Capital (to Risk Weighted Assets)	12.3	%	12.4	%	6.0	%	N/A
Common Equity Tier 1 Capital (to Risk Weighted Assets)	10.7	%	11.3	%	4.5	%	N/A
Tier I Capital (to Average Assets)	9.1	%	8.8	%	4.0	%	N/A

In July 2015, the Bank entered into a Written Agreement (the "2015 Written Agreement") with the FRB replacing the Written Agreement the Company and the Bank entered into with the FRB and the North Carolina Office of the Commissioner of Banks in 2011. Under the terms of the 2015 Written Agreement, the Bank submitted and implemented the following plans:

•a written plan to assure ongoing board oversight of the Bank's management and operations;

•a written program for the review of new products, services, or business lines; and

• an enhanced written program for conducting appropriate levels of customer due diligence by the Bank.

In addition, the Bank agreed that it will within 30 days after the end of each calendar quarter following the date of the 2015 Written Agreement, submit to FRB written progress reports detailing the form and manner of all actions taken to secure compliance with the 2015 Written Agreement and the results thereof.