REGULATORY MATTERS AND RESTRICTIONS

12 Months Ended

Dec. 31, 2015

REGULATORY MATTERS AND RESTRICTIONS [Abstract]

REGULATORY MATTERS AND RESTRICTIONS

14. REGULATORY MATTERS AND RESTRICTIONS

On August 7, 2015, the Bank entered into a new memorandum of understanding with the Federal Deposit Insurance Corporation and the Office of the North Carolina Commissioner of Banks. The informal agreement requires the Bank take certain actions to enhance its management of adversely classified assets, remain well-capitalized and improve earnings. It also restricts dividends that cannot be paid to the holding company without prior approval and requires reporting of progress of implementing additional management improvement plans. On August 19, 2010, the Company entered into a memorandum of understanding with the Federal Reserve Bank of Richmond. The informal agreement requires the Company to receive prior approval for payment of any dividends, to repurchase stock, or to receive any dividends from the Bank.

On August 20, 2010, the Company issued 11,735 shares of $1,000 liquidation value, Series B Fixed Rate Cumulative Perpetual Preferred Stock, (“Series B Preferred Stock”), under the Community Development Capital Initiative (“CDCI”), part of the United States Department of the Treasury (the “Treasury”) Troubled Asset Relief Program (“TARP”). Participation in the CDCI places restrictions on the Company's ability to declare or pay dividends or distributions on, or purchase, redeem or otherwise acquire for consideration, shares of its capital stock, including restrictions against the Company (i) increasing dividends payable on its common stock from the last quarterly cash dividend per share declared on the common stock prior to November 17, 2008; (ii) increasing its aggregate per share dividends and distributions above the aggregate dividends and distributions paid for the immediately prior fiscal year; and (iii) declaring or paying dividends or distributions on, or repurchasing, redeeming or otherwise acquiring for consideration, shares of its capital stock in the event that the Company fails to declare and pay full dividends (or declare and set aside a sum sufficient for payment thereof) on the Series B Preferred Stock. During 2015, the Company did not declare any dividends to its common stockholders. As a consequence of these restrictions, the Company may not pay further dividends to its common stockholders. These restrictions will continue until all of the Series B Preferred Stock has been redeemed in full.

The Company and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements may initiate certain mandatory and the possibility of additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Company 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 about components, risk weightings and other factors. 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 total, Tier 1 and common equity Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2015 and December 31, 2014, that the Company and the Bank met all capital adequacy requirements to which they are subject. To be categorized as well capitalized, the Bank must maintain minimum common equity Tier 1, total risk-based, Tier 1 risk-based and Tier 1 leveraged ratios as set forth in the table below. In addition, the Bank's MOU requires the Bank to maintain a Tier 1 Capital Ratio of not less than 8.0%, which is higher than general well-capitalized standards.

	December 31, 2015
						For Capital
						Adequacy					To Be Well
(Dollars in thousands)	Actual					Purposes					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital (to risk weighted assets)
Company	$	40,252		20.39	%	$	15,790		8.00	%		n/a		n/a
Bank		39,629		20.10			15,769		8.00		$	19,712		10.00	%
Tier 1 (to risk weighted assets)
Company	$	37,768		19.13	%	$	11,843		6.00	%		n/a		n/a
Bank		37,149		18.85			11,827		6.00		$	15,769		8.00	%
Common equity Tier 1 (to risk weighted assets)
Company	$	26,391		13.37	%	$	8,882		4.50	%		n/a		n/a
Bank		37,149		18.85			8,870		4.50		$	12,812		6.50	%
Tier 1 (to average total assets)
Company	$	37,768		12.55	%	$	12,037		4.00	%		n/a		n/a
Bank		37,149		12.35			12,028		4.00		$	15,035		5.00	%
	December 31, 2014
						For Capital
						Adequacy					To Be Well
(Dollars in thousands)	Actual					Purposes					Capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital (to risk weighted assets)
Company	$	38,101		19.03	%	$	16,014		8.00	%		n/a		n/a
Bank		36,991		18.50			15,997		8.00		$	19,996		10.00	%
Tier 1 (to risk weighted assets)
Company	$	35,587		17.78	%	$	8,007		4.00	%		n/a		n/a
Bank		34,479		17.24			7,999		4.00		$	11,998		6.00	%
Tier 1 (to average total assets)
Company	$	35,587		11.90	%	$	11,959		4.00	%		n/a		n/a
Bank		34,479		11.54			11,953		4.00		$	14,941		5.00	%