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,
	2013		2012
	(IN THOUSANDS)
ASSETS
Cash	$	100	$	100
Short-term investments in money market funds		6,561		6,085
Investment securities available for sale		11,909		10,534
Equity investment in banking subsidiary		99,250		99,121
Equity investment in non-banking subsidiaries		5,321		5,017
Guaranteed junior subordinated deferrable interest debenture issuance costs		224		240
Other assets		4,352		2,713
TOTAL ASSETS	$	127,717	$	123,810
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures	$	13,085	$	13,085
Other liabilities		1,325		257
TOTAL LIABILITIES		14,410		13,342
STOCKHOLDERS' EQUITY
Total stockholders' equity		113,307		110,468
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	127,717	$	123,810

STATEMENTS OF OPERATIONS


	YEAR ENDED DECEMBER 31,
	2013		2012			2011
	(IN THOUSANDS)
INCOME
Inter-entity management and other fees	$	2,355	$	2,355		$	2,329
Dividends from banking subsidiary		5,500		8,000			2,500
Dividends from non-banking subsidiaries		675		710			620
Interest and dividend income		243		306			415
TOTAL INCOME		8,773		11,371			5,864
EXPENSE
Interest expense		1,121		1,121			1,121
Salaries and employee benefits		2,502		2,368			2,394
Other expense		1,608		1,582			1,477
TOTAL EXPENSE		5,231		5,071			4,992
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES		3,542		6,300			872
Benefit for income taxes		895		819			764
Equity in undistributed earnings of subsidiaries		756		(2,080	)		4,901
NET INCOME	$	5,193	$	5,039		$	6,537
COMPREHENSIVE INCOME	$	4,697	$	3,320		$	7,739

STATEMENTS OF CASH FLOWS


	YEAR ENDED DECEMBER 31,
	2013		2012			2011
	(IN THOUSANDS)
OPERATING ACTIVITIES
Net income	$	5,193	$	5,039		$	6,537
Adjustment to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries		(756)		2,080			(4,901	)
Stock compensation expense		82		38			15
Other - net		(718)		(989	)		(285	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		3,801		6,168			1,366
INVESTING ACTIVITIES
Purchase of investment securities - available for sale		(3,885)		(2,077	)		(3,049	)
Proceeds from maturity of investment securities - available for sale		2,506		2,809			5,942
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(1,379)		732			2,893
FINANCING ACTIVITIES
Purchase of treasury stock		(1,171)		(4,417	)		(582	)
TARP warrant repurchase		-		-			(825	)
Preferred stock dividends paid		(209)		(828	)		(1,054	)
Common stock dividends paid		(566)		-			-
NET CASH USED IN FINANCING ACTIVITIES		(1,946)		(5,245	)		(2,461	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		476		1,655			1,798
CASH AND CASH EQUIVALENTS AT JANUARY 1		6,185		4,530			2,732
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$	6,661	$	6,185		$	4,530

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. Cash may also be upstreamed to the parent company by the subsidiaries as an inter-entity management fee. The subsidiary Bank had a combined $105,600,000 of restricted surplus and retained earnings at December 31, 2013.

- 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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