Note 20 – Dividend Restrictions and Regulatory Capital

The approval of the Comptroller of the Currency is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank's retained 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 distribute as dividends to the Company, without the approval of the Comptroller of the Currency, $25,211,000 as of December 31, 2013.

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company's and the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are subject to qualitative judgments by the regulators concerning components, risk weighting, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Under the guidelines, total capital is defined as core ("Tier 1") capital and supplementary ("Tier 2") capital less certain specified deductions from total capital such as reciprocal holdings of depository institution capital instruments and equity investments. At least half of the total capital is required to be Tier 1 capital, which consists principally of common and certain qualifying preferred shareholders' equity (including trust preferred securities), less certain intangibles and other adjustments. The remainder, Tier 2 capital, consists of cumulative preferred stock, long-term perpetual preferred stock, a limited amount of subordinated and other qualifying debt (including certain hybrid capital instruments) and a limited amount of the general loan loss allowance. The definition of assets has been modified to include items on and off the balance sheet, with each item being assigned a "risk-weight" for the determination of the ratio of capital to risk-adjusted assets. Management believes, as of December 31, 2013 and 2012, that the Company met the requirements to be considered "well capitalized."

The following table provides summary information regarding regulatory capital:

(in thousands)	Actual					Minimum Capital Requirement			To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio	Amount		Ratio
December 31, 2013
Total Capital
Company	$	161,442		18.14	%	$	71,212	>8.0%
Bank		156,356		17.59	%		71,129	>8.0%	$	88,911	>10.0	%

Tier 1 Capital
Company		150,248		16.88	%		35,606	>4.0%
Bank		145,221		16.33	%		35,564	>4.0%		53,347	>6.0	%

Leverage Capital
Company		150,248		11.81	%		50,900	>4.0%
Bank		145,221		11.43	%		50,825	>4.0%		63,532	>5.0	%

December 31, 2012
Total Capital
Company	$	150,328		17.00	%	$	70,725	>8.0%
Bank		145,808		16.49	%		70,724	>8.0%	$	88,406	>10.00	%

Tier 1 Capital
Company		139,262		15.75	%		35,363	>4.0%
Bank		135,774		15.36	%		35,362	>4.0%		53,043	>6.0	%

Leverage Capital
Company		139,262		11.27	%		49,441	>4.0%
Bank		135,774		10.98	%		49,467	>4.0%		61,834	>5.0	%