Note 20 – Dividend Restrictions and Regulatory Capital

The approval of the Comptroller of the Currency is required if the total of all dividends declared by a national bank in any calendar year exceeds the bank's net income, as defined, for that year combined with its retained net income for the preceding two calendar years. Under this formula, the Bank can distribute as dividends to the Company, without the approval of the Comptroller of the Currency, $18,355,000 as of December 31, 2011.

The Company and the Bank are 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 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 concerning components, risk weighting, and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Under the guidelines, total capital is defined as core (“Tier 1”) capital and supplementary (“Tier 2”) capital. The Company's Tier 1 capital consists primarily of common shareholders' equity and trust preferred capital notes less intangibles, while Tier 2 capital also includes the allowance for loan losses subject to certain limits. The definition of assets has been modified to include items on and off the balance sheet, with each item being assigned a "risk-weight" for the determination of the ratio of capital to risk-adjusted assets. Management believes, as of December 31, 2011 and 2010, that the Company met the requirements to be considered “well capitalized.” As of September 30, 2011, the most recent notification from the Federal Deposit Insurance Corporation categorized the Company as well capitalized under the regulatory framework for prompt corrective action.

The following table provides summary information regarding regulatory capital:

										To Be Well
						Minimum				Capitalized Under
						Capital				Prompt Corrective
(in thousands)	Actual					Requirement				Action Provisions
	Amount		Ratio			Amount		Ratio		Amount		Ratio
December 31, 2011
Total Capital
Company	$	139,734		15.55	%	$	71,872	>8.0	%
Bank		134,241		14.94			71,872	>8.0		$	89,840	10.0	%

Tier 1 Capital
Company		129,005		14.36			35,936	>4.0
Bank		124,487		13.86			35,936	>4.0			53,904	>6.0

Leverage Capital
Company		129,005		10.23			50,429	>4.0
Bank		124,487		9.89			50,373	>4.0			62,967	>5.0


December 31, 2010
Total Capital
Company	$	111,580		19.64	%	$	45,460	>8.0	%
Bank		101,571		17.88			45,458	>8.0		$	56,822	>10.0	%

Tier 1 Capital
Company		104,458		18.38			22,730	>4.0
Bank		95,385		16.79			22,729	>4.0			34,093	>6.0

Leverage Capital
Company		104,458		12.74			32,787	>4.0
Bank		95,385		11.65			32,742	>4.0			40,928	>5.0