REGULATORY MATTERS

12 Months Ended

Dec. 31, 2014

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 2015 without approval of the FRB or PDB of approximately $9,189,000, plus the Bank’s net income for 2015.

Loans:

The Bank is subject to regulatory restrictions which limit its ability to loan funds to the Company.  At December 31, 2014, the Bank’s regulatory lending limit amounted to approximately $14,625,000.

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, 2014 and 2013, 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):

	2014		2013
Total capital (to risk-weighted assets)	Amount	Ratio	Amount	Ratio
Company	$      106,891	18.55%	$      100,320	17.75%
For capital adequacy purposes	46,105	8.00%	45,211	8.00%
To be well capitalized	57,631	10.00%	56,514	10.00%
Tier I capital (to risk-weighted assets)
Company	$        99,692	17.30%	$        92,902	16.44%
For capital adequacy purposes	23,053	4.00%	22,606	4.00%
To be well capitalized	34,579	6.00%	33,908	6.00%
Tier I capital (to average assets)
Company	$        99,692	10.99%	$        92,902	10.42%
For capital adequacy purposes	36,272	4.00%	35,669	4.00%
To be well capitalized	45,341	5.00%	44,587	5.00%

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

	2014		2013
Total capital (to risk-weighted assets)	Amount	Ratio	Amount	Ratio
Bank	$        97,498	16.97%	$        97,863	17.35%
For capital adequacy purposes	45,969	8.00%	45,135	8.00%
To be well capitalized	57,462	10.00%	56,418	10.00%
Tier I capital (to risk-weighted assets)
Bank	$        90,500	15.75%	$        90,639	16.07%
For capital adequacy purposes	22,985	4.00%	22,567	4.00%
To be well capitalized	34,477	6.00%	33,851	6.00%
Tier I capital (to average assets)
Bank	$        90,500	10.00%	$        90,639	10.18%
For capital adequacy purposes	36,218	4.00%	35,615	4.00%
To be well capitalized	45,273	5.00%	44,519	5.00%

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