NOTE 18 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS

 

Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes as of December 31, 2011, the Company and Bank meet all capital adequacy requirements to which they are subject.

 

Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At year-end 2011 and 2010, the most recent regulatory notifications categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action.

 

There have been no subsequent conditions or events that management believes have changed the institution's category.

 

The consolidated and Bank’s capital amounts and ratios, at December 31, 2011 and 2010 are presented below:

																		To Be Well
																		Capitalized Under
										For Capital								Prompt Corrective
		Actual								Adequacy Purposes								Action Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
2011
Total Capital to risk weighted assets
Consolidated		$	180,043				12.95	%		$	111,193				8.00	%		$	N/A				N/A
Bank			179,253				12.91	%			111,101				8.00	%			138,877				10.00	%
Tier 1 (Core) Capital to risk weighted assets
Consolidated		$	142,658				10.26	%		$	55,596				4.00	%		$	N/A				N/A
Bank			141,882				10.22	%			55,551				4.00	%			83,326				6.00	%
Tier 1 (Core) Capital to average assets
Consolidated		$	142,658				8.45	%		$	67,569				4.00	%		$	N/A				N/A
Bank			141,882				8.43	%			67,298				4.00	%			84,123				5.00	%

 

																		To Be Well
																		Capitalized Under
										For Capital								Prompt Corrective
		Actual								Adequacy Purposes								Action Provisions
		Amount				Ratio				Amount				Ratio				Amount				Ratio
2010
Total Capital to risk weighted assets
Consolidated		$	184,077				13.77	%		$	106,930				8.00	%			N/A				N/A
Bank			180,545				13.52	%			106,842				8.00	%		$	133,553				10.00	%
Tier 1 (Core) Capital to risk weighted assets
Consolidated		$	147,361				11.02	%		$	53,465				4.00	%			N/A				N/A
Bank			143,833				10.77	%			53,421				4.00	%		$	80,132				6.00	%
Tier 1 (Core) Capital to average assets
Consolidated		$	147,361				9.41	%		$	62,669				4.00	%			N/A				N/A
Bank			143,833				9.22	%			62,404				4.00	%		$	78,005				5.00	%

  

The Company’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 without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid 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 capital requirements described above. At December 31, 2011 the Bank could pay $13,529 without regulatory approval.