Note 13 - Regulatory Capital and Regulatory Oversight

9 Months Ended

Sep. 30, 2015

Disclosure Text Block [Abstract]

Regulatory Capital Requirements under Banking Regulations [Text Block]

(13) Regulatory Capital and Regulatory Oversight

Effective January 1, 2015 the capital requirements of the Company and the Bank were changed to implement the regulatory requirements of the Basel III capital reforms. The new requirements, among other things, (i) apply a strengthened set of capital requirements to both the Company and the Bank, including new requirements relating to common equity as a component of core capital, (ii) implement a “capital conservation buffer” against risk and a higher minimum tier 1 capital requirement, and (iii) revise the rules for calculating risk-weighted assets for purposes of such requirements. The new rules made corresponding revisions to the prompt corrective action framework and include the new capital ratios and buffer requirements which will be phased in incrementally, with full implementation scheduled for January 1, 2019. 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 financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, both 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 also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

In the second quarter of 2015, the Board of Governors of the Federal Reserve System amended its Small Bank Holding Company Policy Statement (Policy Statement), which exempted small bank holding companies from the above capital requirements, by raising the asset size threshold for determining applicability from $500 million to $1 billion. The Policy Statement was also expanded to include savings and loan holding companies that meet the Policy Statement’s qualitative requirements for exemption. The Company met the qualitative exemption requirements, and therefore, is exempt from the above holding company capital requirements.

Quantitative measures established by regulations to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of Common Equity Tier 1 capital to risk weighted assets (as defined in the regulations), Tier 1 capital to adjusted total assets (as defined), Tier 1 capital to risk weighted assets, and total capital to risk weighted assets.

On September 30, 2015, the Bank’s tangible assets were $607.7 million, its adjusted total assets were $603.3 million, and its risk-weighted assets were $491.7 million. The following table presents the Bank’s capital amounts and ratios at September 30, 2015 for actual capital, required capital, and excess capital, including ratios in order to qualify as being well capitalized under the prompt corrective actions regulations.

	Actual						Required to be Adequately Capitalized					Excess Capital					To Be Well Capitalized Under Prompt Corrective Action Provisions(1)
(Dollars in thousands)	Amount			Percent of Assets(2)			Amount		Percent of Assets (2)			Amount		Percent of Assets(2)			Amount		Percent of Assets(2)
Bank stockholder’s equity	$	73,531
Plus:
Net unrealized gain on certain securities available for sale		(63	)
Less:
Goodwill and other intangibles		165
Disallowed servicing and tax assets		4,217
Common equity tier I capital		69,086
Common equity tier I capital ratio					14.05	%	$	22,126		4.50	%	$	46,960		9.55	%	$	31,960		6.50	%
Tier I capital		69,086
Tier I capital to adjusted total assets (leverage ratio)					11.45	%	$	24,131		4.00	%	$	44,955		7.45	%	$	30,164		5.00	%
Tier I capital to risk-weighted assets					14.05	%	$	29,501		6.00	%	$	39,585		8.05	%	$	39,335		8.00	%
Plus:
Allowable allowance for loan losses		6,211
Risk-based capital	$	75,297					$	39,335				$	35,962				$	49,169
Risk-based capital to risk- weighted assets					15.31	%				8.00	%				7.31	%				10.00	%

(1) Under the recently issued final rules, revised requirements began to be phased in on January 1, 2015, as described above.

(2) Based upon the Bank’s adjusted total assets for the purpose of leverage ratio and risk-weighted assets for the purpose of the risk-based capital ratios.

Management believes that, as of September 30, 2015, the Bank’s capital ratios were in excess of those quantitative capital ratio standards set forth under the current prompt corrective action regulations described above. However, there can be no assurance that the Bank will continue to maintain such status in the future. The OCC has extensive discretion in its supervisory and enforcement activities, and can adjust the requirement to be “well-capitalized” in the future.