REGULATORY MATTERS

12 Months Ended

Dec. 31, 2012

REGULATORY MATTERS [Abstract]

REGULATORY MATTERS

NOTE H – REGULATORY MATTERS

Minimum Regulatory Capital Requirements.  The Corporation (on a consolidated basis) and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possibly additional discretionary actions by the regulators that, if undertaken, could have a direct material effect on the financial statements of the Corporation and Bank. Under the banking agencies' capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and the Bank must satisfy specific capital requirements that involve quantitative measures of their assets, liabilities and certain off-balance-sheet items. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk weighted assets and Tier 1 capital to average assets. Tier 1 capital, risk weighted assets and average assets are as defined by regulation. The required minimums for the Corporation and Bank are set forth in the table that follows.

As of December 31, 2012, the most recent notification from the Federal Deposit Insurance Corporation categorized the Bank as 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 and Tier 1 leverage capital ratios as set forth in the table that follows. There are no conditions or events since the notification that management believes have changed the Bank's category. The Corporation's and the Bank's actual capital amounts and ratios at December 31, 2012 and 2011 are also presented in the table.

	2012
						Minimum					Minimum To Be Well
						Capital Adequacy					Capitalized Under Prompt
	Actual Capital					Requirement					Corrective Action Provisions
	(dollars in thousands)
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital to Risk Weighted Assets:
Consolidated	$	200,879		20.26	%	$	79,309		8.00	%		N/A		N/A
Bank		198,381		20.02			79,260		8.00		$	99,075		10.00	%
Tier 1 Capital to Risk Weighted Assets:
Consolidated		188,410		19.01			39,655		4.00			N/A		N/A
Bank		185,920		18.77			39,630		4.00			59,445		6.00
Tier 1 Capital to Average Assets:
Consolidated		188,410		9.29			81,089		4.00			N/A		N/A
Bank		185,920		9.17			81,070		4.00			101,338		5.00
		2011
						Minimum					Minimum To Be Well
						Capital Adequacy					Capitalized Under Prompt
	Actual Capital					Requirement					Corrective Action Provisions
	(dollars in thousands)
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total Capital to Risk Weighted Assets:
Consolidated	$	182,069		21.56	%	$	67,554		8.00	%		N/A		N/A
Bank		182,016		21.57			67,516		8.00		$	84,395		10.00	%
Tier 1 Capital to Risk Weighted Assets:
Consolidated		171,439		20.30			33,777		4.00			N/A		N/A
Bank		171,393		20.31			33,758		4.00			50,637		6.00
Tier 1 Capital to Average Assets:
Consolidated		171,439		8.81			77,880		4.00			N/A		N/A
Bank		171,393		8.80			77,878		4.00			97,347		5.00

Other Matters.The Corporation's principal source of funds for dividend payments is dividends received from the Bank. Banking regulations limit the amount of dividends that may be paid by the Bank without prior approval of regulatory agencies. Under these regulations, the amount of dividends that the Bank may pay in any calendar year is limited to the current year's net profits, combined with the retained net profits of the preceding two years, subject to the minimum capital requirements described above. During 2013, the Bank could, without prior approval, declare dividends of approximately $27,838,000 plus any 2013 net profits retained to the date of the dividend declaration.

Regulation D of the Board of Governors of The Federal Reserve System requires banks to maintain reserves against certain deposit balances. The Bank's average reserve requirement for 2012 was approximately $11,254,000.

Under national banking laws and related statutes, the Bank is limited as to the amount it may loan to the Corporation, unless such loans are collateralized by specified obligations. At December 31, 2012, the maximum amount available for transfer from the Bank to the Corporation in the form of loans approximated $18,287,000.