Regulatory Matters

12 Months Ended

Dec. 31, 2011

Deposits and Regulatory Matters [Abstract]

Regulatory Matters

NOTE V – REGULATORY MATTERS

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 that could have a direct material adverse effect on the consolidated financial statements. Prompt corrective action provisions are not applicable to bank holding companies.

The prompt corrective action regulations provide five capital categories, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized or worse, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required.

At year end, actual capital levels and minimum required levels were as follows (in thousands):

	Actual					Minimum Required For Capital Adequacy Purposes					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2011
Total capital (to risk weighted assets)
Consolidated	$	47,309		13.7	%	$	27,684		8.0	%		N/A		N/A
Bank		47,078		13.7			27,572		8.0		$	34,465		10.0	%
Tier 1 capital (to risk weighted assets)
Consolidated		42,970		12.4			13,842		4.0			N/A		N/A
Bank		42,756		12.4			13,786		4.0			20,679		6.0
Tier 1 capital (to average assets)
Consolidated		42,970		8.6			19,917		4.0			N/A		N/A
Bank		42,756		8.6			19,963		4.0			24,953		5.0

	Actual					Minimum Required For Capital Adequacy Purposes					Minimum Required To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio
2010
Total capital (to risk weighted assets)
Consolidated	$	43,577		13.7	%	$	25,459		8.0	%		N/A		N/A
Bank		44,284		14.0			25,365		8.0		$	31,707		10.0	%
Tier 1 capital (to risk weighted assets)
Consolidated		39,578		12.4			12,729		4.0			N/A		N/A
Bank		40,299		12.7			12,683		4.0			19,024		6.0
Tier 1 capital (to average assets)
Consolidated		39,578		8.2			19,263		4.0			N/A		N/A
Bank		40,299		8.4			19,235		4.0			24,044		5.0

Regulatory Developments: On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), which brings significant financial reform. Among other things, the law:

• Creates a Financial Services Oversight Council to identify emerging systemic risks and improve interagency cooperation;

• Creates a Consumer Financial Protection Agency authorized to promulgate and enforce consumer protection regulations relating to financial products, which would affect both banks and non-bank finance companies;

• Establishes strengthened capital standards for banks and bank holding companies, and disallows trust preferred securities from being included in Tier 1 capital determination for certain financial institutions;

• Enhances regulation of financial markets, including derivatives and securitization markets;

• Contains a series of provisions covering mortgage loan origination standards affecting, among other things, originator compensation, minimum repayment standards and prepayments;

• Grants the Board of Governors of the Federal Reserve System the power to regulate debit card interchange fees;

• Prohibits certain trading activities by banks;

• Permanently increases the maximum standards FDIC deposit insurance amount to $250,000; and

• Creates an Office of National Insurance with the U.S. Department of Treasury.

While the provisions of the Act receiving the most public attention have generally been those more likely to affect larger institutions, the Act also contains many provisions which will affect smaller institutions such as the Company in substantial and unpredictable ways. Consequently, compliance with the Act’s provisions may curtail the Company’s revenue opportunities, increase its operating costs, require it to hold higher levels of regulatory capital and/or liquidity or otherwise adversely affect the Company’s business or financial results in the future. The Company’s management is actively reviewing the provisions of the Act and assessing its probable impact on the Company’s business, financial condition, and result of operations. However, because many aspects of the Act are subject to future rulemaking, it is difficult to precisely anticipate its overall financial impact on the Company and Bank at this time.