REGULATORY MATTERS

12 Months Ended

Dec. 31, 2013

REGULATORY MATTERS [Abstract]

REGULATORY MATTERS

 

14. REGULATORY MATTERS

Dividend Restrictions:

The approval of the Federal Reserve Board is required for a 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 2014 without approval of the FRB or PDB of approximately $19,309,000, plus the Bank’s net income for 2014.

Loans:

The Bank is subject to regulatory restrictions which limit its ability to loan funds to the Company.  At December 31, 2013, the regulatory lending limit amounted to approximately $14,702,000.

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, 2013 and 2012, the FRB categorized the Company and 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):

	2013		2012
Total capital (to risk-weighted assets)	Amount	Ratio	Amount	Ratio
Company	$      100,320	17.75%	$        90,889	17.50%
For capital adequacy purposes	45,211	8.00%	41,546	8.00%
To be well capitalized	56,514	10.00%	51,932	10.00%
Tier I capital (to risk-weighted assets)
Company	$        92,902	16.44%	$        84,166	16.21%
For capital adequacy purposes	22,606	4.00%	20,773	4.00%
To be well capitalized	33,908	6.00%	31,159	6.00%
Tier I capital (to average assets)
Company	$        92,902	10.42%	$        84,166	9.70%
For capital adequacy purposes	35,669	4.00%	34,692	4.00%
To be well capitalized	44,587	5.00%	43,366	5.00%

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

	2013		2012
Total capital (to risk-weighted assets)	Amount	Ratio	Amount	Ratio
Bank	$        97,863	17.35%	$        87,215	16.84%
For capital adequacy purposes	45,135	8.00%	41,425	8.00%
To be well capitalized	56,418	10.00%	51,781	10.00%
Tier I capital (to risk-weighted assets)
Bank	$        90,639	16.07%	$        80,702	15.59%
For capital adequacy purposes	22,567	4.00%	20,713	4.00%
To be well capitalized	33,851	6.00%	31,069	6.00%
Tier I capital (to average assets)
Bank	$        90,639	10.18%	$        80,702	9.32%
For capital adequacy purposes	35,615	4.00%	34,634	4.00%
To be well capitalized	44,519	5.00%	43,293	5.00%

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