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 June 30, 2015, 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 June 30, 2015 and December 31, 2014, respectively. The June 30, 2015 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
June 30, 2015:
Total Capital to Risk Weighted Assets:
The Company	$	64,121	16.84%	$ 30,452	8.0%	$	N/A	N/A
The Bank		63,948	16.79%	30,476	8.0%		38,095	10.0%
Tier 1 Capital to Risk Weighted Assets:
The Company		57,981	15.23%	22,839	6.0%		N/A	N/A
The Bank		59,137	15.52%	22,857	6.0%		30,476	8.0%
Tier 1 Capital to Average Assets:
The Company		57,981	8.84%	26,223	4.0%		N/A	N/A
The Bank		59,137	9.01%	26,245	4.0%		32,806	5.0%
Common Equity Tier 1 Capital to Risk Weighted Assets:
The Company		43,313	11.38%	17,130	4.5%		N/A	N/A
The Bank		59,137	15.52%	17,143	4.5%		24,762	6.5%

December 31, 2014:
Total Capital to Risk Weighted Assets:
The Company	$	59,816	15.98%	$ 29,948	8.0%	$	N/A	N/A
The Bank		58,869	15.73%	29,938	8.0%		37,422	10.0%
Tier 1 Capital to Risk Weighted Assets:
The Company		53,379	14.26%	14,974	4.0%		N/A	N/A
The Bank		54,127	14.46%	14,969	4.0%		22,453	6.0%
Tier 1 Capital to Average Assets:
The Company		53,379	8.07%	26,453	4.0%		N/A	N/A
The Bank		54,127	8.19%	26,447	4.0%		33,058	5.0%

As of June 30, 2015, 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.