26. 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,
	2019		2018
	(IN THOUSANDS)
ASSETS
Cash	$	100	$	100
Short-term investments in money market funds		2,544		3,711
Cash and cash equivalents		2,644		3,811
Investment securities available for sale		3,758		4,747
Equity investment in banking subsidiary		104,843		103,647
Equity investment in non-banking subsidiaries		7,830		6,745
Other assets		978		208
TOTAL ASSETS	$	120,053	$	119,158
LIABILITIES
Guaranteed junior subordinated deferrable interest debentures	$	12,955	$	12,939
Subordinated debt		7,511		7,488
Other liabilities		973		754
TOTAL LIABILITIES		21,439		21,181
STOCKHOLDERS’ EQUITY
Total stockholders’ equity		98,614		97,977
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	120,053	$	119,158

STATEMENTS OF OPERATIONS


	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
INCOME
Inter-entity management and other fees	$	2,556	$	2,430	$	2,315
Dividends from banking subsidiary		3,800		3,500		2,850
Dividends from non-banking subsidiaries		1,105		1,190		840
Interest, dividend and other income		186		119		163
TOTAL INCOME		7,647		7,239		6,168
EXPENSE
Interest expense		1,642		1,642		1,642
Salaries and employee benefits		2,614		2,610		2,416
Other expense		1,707		1,733		1,618
TOTAL EXPENSE		5,963		5,985		5,676
INCOME BEFORE INCOME TAXES AND EQUITY IN UNDISTRIBUTED EARNINGS OF SUBSIDIARIES		1,684		1,254		492
Benefit for income taxes		(676)		(722)		(1,114)
Equity in undistributed earnings of subsidiaries		3,668		5,792		1,687
NET INCOME	$	6,028	$	7,768	$	3,293
COMPREHENSIVE INCOME	$	4,082	$	6,493	$	4,051

STATEMENTS OF CASH FLOWS


	YEAR ENDED DECEMBER 31,
	2019		2018		2017
	(IN THOUSANDS)
OPERATING ACTIVITIES
Net income	$	6,028	$	7,768	$	3,293
Adjustment to reconcile net income to net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries		(3,668)		(5,792)		(1,687)
Stock compensation expense		7		14		13
Other – net		(427)		433		1,325
NET CASH PROVIDED BY OPERATING ACTIVITIES		1,940		2,423		2,944
INVESTING ACTIVITIES
Purchase of investment securities – available for sale		—		(1,002)		(1,002)
Proceeds from maturity and sales of investment securities – available for sale		1,085		1,462		1,699
NET CASH PROVIDED BY INVESTING ACTIVITIES		1,085		460		697
FINANCING ACTIVITIES
Purchases of treasury stock		(2,550)		(2,346)		(3,404)
Common stock dividends paid		(1,642)		(1,347)		(1,113)
NET CASH USED IN FINANCING ACTIVITIES		(4,192)		(3,693)		(4,517)
NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,167)		(810)		(876)
CASH AND CASH EQUIVALENTS AT JANUARY 1		3,811		4,621		5,497
CASH AND CASH EQUIVALENTS AT DECEMBER 31	$	2,644	$	3,811	$	4,621

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 $108,228,000 of restricted surplus and retained earnings at December 31, 2019.