24. PARENT COMPANY FINANCIAL INFORMATION

The parent company functions primarily as a coordinating and servicing unit for all subsidiary entities. Provided services include general management, accounting and taxes, loan review, internal auditing, investment advisory, marketing, insurance risk management, general corporate services, and financial and strategic planning. The following financial information relates only to the parent company operations:

BALANCE SHEETS


	AT DECEMBER 31,
	2012		2011
	(IN THOUSANDS)
ASSETS
Cash	$	100	$	100
Short-term investments in money market funds		6,085		4,430
Investment securities available for sale		10,534		11,269
Equity investment in banking subsidiary		99,121		103,010
Equity investment in non-banking subsidiaries		5,017		4,888
Guaranteed junior subordinated deferrable interest debenture issuance costs		240		256
Other assets		2,713		2,604
TOTAL ASSETS	$	123,810	$	126,557
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures	$	13,085	$	13,085
Other liabilities		257		1,120
TOTAL LIABILITIES		13,342		14,205
STOCKHOLDERS' EQUITY
Total stockholders' equity		110,468		112,352
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	123,810	$	126,557

STATEMENTS OF OPERATIONS


	YEAR ENDED DECEMBER 31,
	2012		2011		2010
	(IN THOUSANDS)
INCOME
Inter-entity management and other fees	$	2,355	$	2,329	$	2,362
Dividends from banking subsidiary		8,000		2,500		-
Dividends from non-banking subsidiaries		710		620		205
Interest and dividend income		306		415		499
TOTAL INCOME		11,371		5,864		3,066
EXPENSE
Interest expense		1,121		1,121		1,121
Salaries and employee benefits		2,368		2,394		2,333
Other expense		1,582		1,477		1,529
TOTAL EXPENSE		5,071		4,992		4,983
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES		6,300		872		(1,917	)
Benefit for income taxes		819		764		722
Equity in undistributed earnings of subsidiaries		(2,080)		4,901		2,477
NET INCOME	$	5,039	$	6,537	$	1,282
COMPREHENSIVE INCOME	$	3,320	$	7,739	$	793

STATEMENTS OF CASH FLOWS


	YEAR ENDED DECEMBER 31,
	2012		2011			2010
	(IN THOUSANDS)
OPERATING ACTIVITIES
Net income	$	5,039	$	6,537		$	1,282
Adjustment to reconcile net income to net cash provided by (used in) operating activities:
Equity in undistributed earnings of subsidiaries		2,080		(4,901	)		(2,477	)
Stock compensation expense		38		15			61
Other - net		(989)		(285	)		(107	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		6,168		1,366			(1,241	)
INVESTING ACTIVITIES
Purchase of investment securities - available for sale		(2,077)		(3,049	)		(4,044	)
Proceeds from maturity of investment securities - available for sale		2,809		5,942			7,050
Capital contribution to banking subsidiary		-		-			(1,000	)
NET CASH PROVIDED BY INVESTING ACTIVITIES		732		2,893			2,006
FINANCING ACTIVITIES
Purchase of treasury stock		(4,417)		(582	)		-
Warrant repurchase		-		(825	)		-
Preferred stock dividends paid		(828)		(1,054	)		(1,050	)
NET CASH USED IN FINANCING ACTIVITIES		(5,245)		(2,461	)		(1,050	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		1,655		1,798			(285	)
CASH AND CASH EQUIVALENTS AT JANUARY 1		4,530		2,732			3,017
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$	6,185	$	4,530		$	2,732

The ability of the subsidiary Bank to upstream cash to the parent company is restricted by regulations. Federal law prevents the parent company from borrowing from its subsidiary Bank unless the loans are secured by specified assets. Further, such secured loans are limited in amount to ten percent of the subsidiary Bank's capital and surplus. In addition, the Bank is subject to legal limitations on the amount of dividends that can be paid to its shareholder. The dividend limitation generally restricts dividend payments to a bank's retained net income for the current and preceding two calendar years. At December 31, 2012, our subsidiary Bank had $5.1 million of cash available for immediate dividends to the holding company under the applicable regulatory formulas. Cash may also be upstreamed to the parent company by the subsidiaries as an inter-entity management fee. The subsidiary Bank had a combined $107,300,000 of restricted surplus and retained earnings at December 31, 2012.

- Definition

The entire disclosure for condensed financial information, including the financial position, cash flows, and the results of operations of the registrant (parent company) as of the same dates or for the same periods for which audited consolidated financial statements are being presented. Alternatively, the details of this disclosure can be reported by the specific parent company taxonomy elements, indicating the appropriate date and period contexts in an instance document.

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