Regulatory Matters

6 Months Ended

Jun. 30, 2012

Regulatory Matters

Regulatory Matters

Note 8: Regulatory Matters

The Bank is 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 Bank must meet specific capital guidelines that involve quantitative measures of 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.

The Bank must give notice to the Federal Reserve Bank of Cleveland prior to declaring a dividend to the Company and is subject to existing regulatory guidance where, in general, a dividend is permissible without regulatory approval if the institution is considered to be “well capitalized” and the dividend does not exceed current year to date net income plus the change in retained earnings for the previous two calendar years.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of risk-based capital (as defined in the regulations) to risk-weighted assets (as defined), and of tangible and core capital (as defined) to adjusted total assets (as defined). As of June 30, 2012, the Bank met all capital adequacy requirements to which it was subject.

As of June 30, 2012, the Bank was classified as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well-capitalized, the Bank must maintain capital ratios as set forth in the table below. There are no conditions or events since June 30, 2012 that management believes have changed the Bank’s capital classification.

The Bank’s actual capital amounts and ratios as of June 30, 2012 and December 31, 2011 are presented in the following table.

	Actual					For Capital Adequacy Purposes					Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
As of June 30, 2012
Total risk-based capital     (to risk-weighted assets)	$	38,612		16.8	%	$	18,368		8.0	%	$	22,961		10.0	%
Tier I capital     (to risk-weighted assets)		35,738		15.6			9,184		4.0			13,776		6.0
Tier I capital     (to average assets)		35,738		8.8			16,314		4.0			20,393		5.0
As of December 31, 2011
Tangible capital	$	35,132		8.7	%	$	6,074		1.5	%	$	20,248		5.0	%
Core capital		35,132		8.7			16,198		4.0			24,297		6.0
Risk-based capital		38,070		16.2			18,802		8.0			23,503		10.0