REGULATORY MATTERS

12 Months Ended

Dec. 31, 2011

Regulatory Capital Requirements Disclosure [Abstract]

REGULATORY MATTERS

15. REGULATORY MATTERS

Dividend Restrictions:

The approval of the Comptroller of the Currency is required for a national bank to pay dividends up to the Company if the total of all dividends declared in any calendar year exceeds the Bank's net income (as defined) for that year combined with its retained net income for the preceding two calendar years. Under this formula, the Bank can declare dividends in 2012 without approval of the Comptroller of the Currency of approximately $17,775,000, plus the Bank's net income for 2012.

Loans:

The Bank is subject to regulatory restrictions which limit its ability to loan funds to the Company.  At December 31, 2011, the regulatory lending limit amounted to approximately $9,062,000.

Regulatory Capital Requirements:

Federal regulations require the Company and the Bank to maintain minimum amounts of capital. Specifically, each is required to maintain certain minimum dollar amounts and ratios of Total and Tier I capital to risk-weighted assets and of Tier I capital to average total assets.

In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act (FDICIA) established five capital categories ranging from “well capitalized” to “critically under-capitalized.” Should any institution fail to meet the requirements to be considered “adequately capitalized”, it would become subject to a series of increasingly restrictive regulatory actions.

As of December 31, 2011 and 2010, the FRB categorized the Company and the OCC categorized the Bank as well capitalized, under the regulatory framework for prompt corrective action.  To be categorized as a well capitalized financial institution, Total risk-based, Tier I risk-based and Tier I leverage capital ratios must be at least 10%, 6% and 5%, respectively.

The following table reflects the Company's capital ratios at December 31 (dollars in thousands):

	2011		2010
Total capital (to risk-weighted assets)	Amount	Ratio	Amount	Ratio
Company	$        82,050	16.23%	$        72,371	14.97%
For capital adequacy purposes	40,432	8.00%	38,678	8.00%
To be well capitalized	50,540	10.00%	48,348	10.00%
Tier I capital (to risk-weighted assets)
Company	$        75,541	14.95%	$        66,327	13.72%
For capital adequacy purposes	20,216	4.00%	19,339	4.00%
To be well capitalized	30,324	6.00%	29,008	6.00%
Tier I capital (to average assets)
Company	$        75,541	8.83%	$        66,327	8.32%
For capital adequacy purposes	34,223	4.00%	31,890	4.00%
To be well capitalized	42,779	5.00%	39,862	5.00%

The following table reflects the Bank's capital ratios at December 31 (dollars in thousands):

	2011		2010
Total capital (to risk-weighted assets)	Amount	Ratio	Amount	Ratio
Bank	$        77,051	15.29%	$        66,814	13.87%
For capital adequacy purposes	40,326	8.00%	38,551	8.00%
To be well capitalized	50,408	10.00%	48,189	10.00%
Tier I capital (to risk-weighted assets)
Bank	$        70,729	14.03%	$        60,899	12.64%
For capital adequacy purposes	20,163	4.00%	19,276	4.00%
To be well capitalized	30,245	6.00%	28,913	6.00%
Tier I capital (to average assets)
Bank	$        70,729	8.28%	$        60,899	7.65%
For capital adequacy purposes	34,166	4.00%	31,836	4.00%
To be well capitalized	42,708	5.00%	39,794	5.00%

This annual report has not been reviewed, or confirmed for accuracy or relevance, by the Federal Deposit Insurance Corporation.