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4. CAPITAL

3 Months Ended

Mar. 31, 2016

NOTE 4 CAPITAL:

Capital Requirements and Ratios

The Company and the Bank are subject to various capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and, possibly, additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital (as defined) to risk-weighted assets (as defined), Tier 1 capital (as defined) to average assets (as defined), and Common Equity Tier 1 capital (as defined) to risk-weighted assets (as defined). Management believes that, as of March 31, 2016, the Company and the Bank meet all capital adequacy requirements to which they are subject. The Company’s and the Bank’s actual capital amounts and ratios are presented in the following table as of March 31, 2016 and December 31, 2015, respectively. These ratios comply with Federal Reserve rules to align with the Basel III Capital requirements effective January 1, 2015.


	Actual					Minimum Capital Requirement					Minimum to Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars are in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2016:
Total Capital to Risk Weighted Assets:
The Company		67,718		17.54	%	$	30,888		8.0	%		N/A		N/A
The Bank		66,711		17.28	%		30,883		8.0	%		38,604		10.0	%
Tier 1 Capital to Risk Weighted Assets:
The Company		62,566		16.20	%		23,166		6.0	%		N/A		N/A
The Bank		61,856		16.02	%		23,162		6.0	%		30,883		8.0	%
Tier 1 Capital to Average Assets:
The Company		62,566		9.95	%		25,157		4.0	%		N/A		N/A
The Bank		61,856		9.83	%		25,158		4.0	%		31,447		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
The Company		46,862		12.14	%		17,374		4.5	%		N/A		N/A
The Bank		61,856		16.02	%		17,372		4.5	%		25,093		6.5	%

December 31, 2015:
Total Capital to Risk Weighted Assets:
The Company		66,649		17.80	%	$	29,954		8.0	%		N/A		N/A
The Bank		65,713		17.55	%		29,954		8.0	%		37,443		10.0	%
Tier 1 Capital to Risk Weighted Assets:
The Company		61,406		16.40	%		22,465		6.0	%		N/A		N/A
The Bank		60,998		16.29	%		22,466		6.0	%		29,954		8.0	%
Tier 1 Capital to Average Assets:
The Company		61,406		9.74	%		25,229		4.0	%		N/A		N/A
The Bank		60,998		9.67	%		25,239		4.0	%		31,549		5.0	%
Common Equity Tier 1 Capital to Risk Weighted Assets:
The Company		45,934		12.27	%		16,849		4.5	%		N/A		N/A
The Bank		60,998		16.29	%		16,849		4.5	%		24,338		6.5	%

As of March 31, 2016, the Bank was well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage, and Common Equity Tier 1 ratios as set forth in the above tables. There are no conditions or events since the notification that management believes have changed the Company’s and Bank’s category.

Beginning January 1, 2016, a capital conservation buffer of 0.625% became effective. The capital conservation buffer will be gradually increased through January 1, 2019 to 2.5%. Banks will be required to maintain levels that meet the required minimum plus the capital conservation buffer in order to make distributions or discretionary bonus payments.