Regulatory Matters

6 Months Ended

Jun. 30, 2012

Regulatory Matters [Abstract]

Regulatory Matters

(11) Regulatory Matters

Bancorp’s and the Bank’s actual capital ratios for purposes of bank regulatory capital guidelines are presented in the following table:

	Ratio required to be well capitalized under prompt corrective action provisions			Minimum ratio required for capital adequacy purposes			Bancorp’s Ratio			Bank’s Ratio
As of June 30, 2012:
Tier 1 Capital (to Average Assets)		³5.00	%		³3.00	%		8.25	%		8.25	%
Tier 1 Capital (to Risk Weighted Assets)		³6.00	%		³4.00	%		12.09			12.09
Total Capital (to Risk Weighted Assets)		³10.00	%		³8.00	%		13.35			13.35
As of December 31, 2011:
Tier 1 Capital (to Average Assets)		³5.00	%		³3.00	%		8.25	%		8.25	%
Tier 1 Capital (to Risk Weighted Assets)		³6.00	%		³4.00	%		12.59			12.59
Total Capital (to Risk Weighted Assets)		³10.00	%		³8.00	%		13.85			13.85
As of June 30, 2011:
Tier 1 Capital (to Average Assets)		³5.00	%		³3.00	%		8.39	%		8.39	%
Tier 1 Capital (to Risk Weighted Assets)		³6.00	%		³4.00	%		12.20			12.20
Total Capital (to Risk Weighted Assets)		³10.00	%		³8.00	%		13.46			13.46

During April 2011, the Bank’s Board of Directors adopted a resolution at the request of the Federal Deposit Insurance Corporation to the effect that the Bank, through its management, will take various actions designed to address issues related to the Bank’s operations. The Resolution provides that, among other things, the Bank will (1) establish and continue to maintain an adequate reserve for loan losses, and review the adequacy of the reserve with the Board prior to each quarter-end and make appropriate provisions to the reserve; (2) in order to maintain sufficient capital levels, establish and document a prudent policy regarding cash dividends the Bank pays to Bancorp, document an analysis of amounts to be paid by each quarter-end prior to payment, and not pay any cash dividend to Bancorp without seeking the prior approval of the FDIC and N.C. Commissioner of Banks; (3) implement various recommendations regarding risk management policies and practices for the Bank’s funds management and investment functions; (4) provide for the internal audit program to include a review and coverage of activities sufficient to determine compliance with the Bank’s policies, applicable laws and regulations and sound banking principles, and identification of audit personnel who periodically report directly to the Board; (5) correct or eliminate various credit administration weaknesses and establish an effective credit administration function, and ascertain that all necessary supporting documentation is obtained and evaluated before loans are extended; and (6) correct violations of and ensure further compliance with applicable laws, rules and regulations.