16. Regulatory matters:

Dividends are paid by the Company from its assets, which are mainly provided by dividends from Peoples Bank. Certain restrictions exist regarding the ability of Peoples Bank to transfer funds to the Company in the form of cash dividends, loans or advances. Under such restrictions, Peoples Bank may not, without the prior approval, declare dividends in excess of the sum of its net profit for that year combined with its retained net profits of the preceding two calendar years, less any required transfer to surplus.

The amount of funds available for transfer from Peoples Bank to the Company in the form of loans and other extensions of credit to any one affiliate are limited to 10.0 percent of capital and surplus. The maximum amount available for transfer from Peoples Bank to the Company in the form of loans was $5,286, at December 31, 2011.

The Company and Peoples Bank are subject to certain regulatory capital requirements administered by the federal banking agencies, which are defined in Section 38 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”). 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 Peoples Bank's financial statements. In the event an institution is deemed to be undercapitalized by such standards, FDICIA prescribes an increasing amount of regulatory intervention, including the required institution of a capital restoration plan and restrictions on the growth of assets, branches or lines of business. Further restrictions are applied to the significantly or critically undercapitalized institutions including restrictions on interest payable on accounts, dismissal of management and appointment of a receiver. For well capitalized institutions, FDICIA provides authority for regulatory intervention when the institution is deemed to be engaging in unsafe and unsound practices or receives a less than satisfactory examination report rating. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Peoples 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 classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Prompt corrective action provisions are not applicable to bank holding companies.

Peoples Bank was categorized as “well capitalized” under the regulatory framework for prompt corrective action at December 31, 2011 and 2010, based on the most recent notification from the Federal Deposit Insurance Corporation. To be categorized as well capitalized, Peoples Bank must maintain certain minimum Tier I risk-based, total risk-based and Tier I Leverage ratios as set forth in the following tables. The Tier I Leverage ratio is defined as Tier I capital to total average assets less intangible assets. There are no conditions or events since the most recent notification that management believes have changed Peoples Bank's category.

The Company and Peoples Bank's actual capital ratios at December 31, 2011 and 2010, and the minimum ratios required for capital adequacy purposes and to be well capitalized under the prompt corrective action provisions are as follows:

	Actual					Minimum For Capital Adequacy Purposes					Minimum to be Well Capitalized under Prompt Corrective Action Provisions
December 31, 2011	Amount		Ratio			Amount		Ratio			Amount		Ratio
Tier 1 capital to risk-weighted assets:
Consolidated	$	55,282		11.57	%	$	19,115		4.00	%
Peoples Bank		52,242		10.95			19,090		4.00		$	28,635		6.00	%
Total capital to risk-weighted assets:
Consolidated		60,659		12.69			38,231		8.00
Peoples Bank		57,619		12.07			38,180		8.00			47,726		10.00
Tier 1 capital to average assets:
Consolidated		55,282		9.42			23,477		4.00
Peoples Bank	$	52,242		8.92	%	$	23,429		4.00	%	$	29,286		5.00	%

	Actual					Minimum For Capital Adequacy Purposes					Minimum to be Well Capitalized under Prompt Corrective Action Provisions
December 31, 2010	Amount		Ratio			Amount		Ratio			Amount		Ratio
Tier 1 capital to risk-weighted assets:
Consolidated	$	50,298		11.72	%	$	17,160		4.00	%
Peoples Bank		46,617		10.90			17,107		4.00		$	25,660		6.00	%
Total capital to risk-weighted assets:
Consolidated		54,398		12.68			34,320		8.00
Peoples Bank		50,717		11.86			34,214		8.00			42,767		10.00
Tier 1 capital to average assets:
Consolidated		50,298		9.19			21,897		4.00
Peoples Bank	$	46,617		8.53	%	$	21,860		4.00	%	$	27,324		5.00	%