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,

2014

2013

(IN THOUSANDS)

ASSETS

Cash

100

100

Short-term investments in money market funds

5,784

6,561

Investment securities available for sale

11,714

11,909

Equity investment in banking subsidiary

100,473

99,250

Equity investment in non-banking subsidiaries

5,685

5,321

Guaranteed junior subordinated deferrable interest debenture issuance costs

209

224

Other assets

4,698

4,352

TOTAL ASSETS

128,663

127,717

LIABILITIES

Guaranteed junior subordinated deferrable interest debentures

13,085

13,085

Other liabilities

1,171

1,325

TOTAL LIABILITIES

14,256

14,410

STOCKHOLDERS' EQUITY

Total stockholders' equity

114,407

113,307

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

128,663

127,717

STATEMENTS OF OPERATIONS

	YEAR ENDED DECEMBER 31,
	2014			2013		2012

	(IN THOUSANDS)
INCOME
Inter-entity management and other fees	$	2,432		$	2,355	$	2,355
Dividends from banking subsidiary		1,500			5,500		8,000
Dividends from non-banking subsidiaries		870			675		710
Interest and dividend income		262			243		306
TOTAL INCOME		5,064			8,773		11,371

EXPENSE
Interest expense		1,121			1,121		1,121
Salaries and employee benefits		2,576			2,502		2,368
Other expense		1,996			1,608		1,582
TOTAL EXPENSE		5,693			5,231		5,071

INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES		(629	)		3,542		6,300
Benefit for income taxes		1,020			895		819
Equity in undistributed earnings of subsidiaries		2,632			756		(2,080	)
NET INCOME	$	3,023		$	5,193	$	5,039

COMPREHENSIVE INCOME	$	1,996		$	4,697	$	3,320

STATEMENTS OF CASH FLOWS

	YEAR ENDED DECEMBER 31,
	2014			2013			2012

	(IN THOUSANDS)
OPERATING ACTIVITIES
Net income	$	3,023		$	5,193		$	5,039
Adjustment to reconcile net income to net cash (used in) provided by operating activities:
Equity in undistributed earnings of subsidiaries		(2,632	)		(756	)		2,080
Stock compensation expense		42			82			38
Other – net		(505	)		(718	)		(989	)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(72	)		3,801			6,168

INVESTING ACTIVITIES
Purchase of investment securities – available for sale		(2,027	)		(3,885	)		(2,077	)
Proceeds from maturity of investment securities – available for sale		2,284			2,506			2,809
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		257			(1,379	)		732

FINANCING ACTIVITIES
Purchase of treasury stock		-			(1,171	)		(4,417	)
Preferred stock dividends paid		(210	)		(209	)		(828	)
Common stock dividends paid		(752	)		(566	)		-
NET CASH USED IN FINANCING ACTIVITIES		(962	)		(1,946	)		(5,245	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(777	)		476			1,655
CASH AND CASH EQUIVALENTS AT JANUARY 1		6,661			6,185			4,530
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$	5,884		$	6,661		$	6,185

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 $105,400,000 of restricted surplus and retained earnings at December 31, 2014.