REGULATORY MATTERS

12 Months Ended

Dec. 31, 2016

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 2017 without approval of the FRB or PDB of approximately $13,925,000, plus the Bank's 2017 year-to-date net income at the time of the dividend declaration.

Loans:

The Bank is subject to regulatory restrictions which limit its ability to loan funds to the Company.  At December 31, 2016, the Bank's regulatory lending limit amounted to approximately $17,631,000.

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, Tier I and Common Equity 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, 2016 and 2015, 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, Common Equity Tier I risk based and Tier I leverage capital ratios must be at least 10%, 8%, 6.5% and 5%, respectively.

The Company and Bank's computed risk‑based capital ratios are as follows as of December 31, 2016 and 2015 (dollars in thousands):

	Actual					For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
2016	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital (to Risk Weighted Assets):
Company	$	121,717		14.93	%	$	65,217		8.00	%	$	81,522		10.00	%
Bank	$	117,537		14.46	%	$	65,020		8.00	%	$	81,275		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Company	$	112,599		13.81	%	$	48,913		6.00	%	$	65,217		8.00	%
Bank	$	108,419		13.34	%	$	48,765		6.00	%	$	65,020		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Company	$	105,099		12.89	%	$	36,685		4.50	%	$	52,989		6.50	%
Bank	$	108,419		13.34	%	$	36,574		4.50	%	$	52,829		6.50	%
Tier 1 Capital (to Average Assets):
Company	$	112,599		9.46	%	$	47,586		4.00	%	$	59,483		5.00	%
Bank	$	108,419		9.13	%	$	39,006		4.00	%	$	48,757		5.00	%
2015
Total Capital (to Risk Weighted Assets):
Company	$	114,886		16.23	%	$	56,630		8.00	%	$	70,787		10.00	%
Bank	$	108,232		15.34	%	$	56,443		8.00	%	$	70,554		10.00	%
Tier 1 Capital (to Risk Weighted Assets):
Company	$	107,612		15.20	%	$	42,472		6.00	%	$	56,630		8.00	%
Bank	$	100,958		14.31	%	$	42,332		6.00	%	$	56,443		8.00	%
Common Equity Tier 1 Capital (to Risk Weighted Assets):
Company	$	100,112		14.14	%	$	31,854		4.50	%	$	46,012		6.50	%
Bank	$	100,958		14.31	%	$	31,749		4.50	%	$	45,860		6.50	%
Tier 1 Capital (to Average Assets):
Company	$	107,612		11.01	%	$	39,083		4.00	%	$	48,854		5.00	%
Bank	$	100,958		10.35	%	$	39,006		4.00	%	$	48,757		5.00	%

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