Regulatory Matters

12 Months Ended

Dec. 31, 2011

NOTE 17. REGULATORY MATTERS

The Company and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. 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 financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification 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. Quantitative measures established by regulations to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios of total and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets, as such terms are defined in the regulations. To be considered adequately capitalized, the Company and the Bank must maintain a minimum total capital to risk-weighted assets ratio of 8.0%, Tier 1 capital to risk-weighted assets ratio of 4.0% and Tier 1 capital to average assets ratio of 4.0%. In addition to these minimum capital ratios, the Bank is required by its federal and state banking regulators to maintain a minimum Tier 1 capital to average assets ratio of 8.0%.

As of December 31, 2011, the most recent regulatory notification categorized the Bank as "well capitalized" under the regulatory framework for prompt corrective action. To be considered "well capitalized", the Bank must maintain a minimum total capital to risk-weighted assets ratio of 10.0%, Tier 1 capital to risk-weighted assets ratio of 6.0% and Tier 1 capital to average assets ratio of 5.0%. No conditions or events have occurred since that notification that management believes would change this classification.

Due to its elevated level of nonperforming assets, the Company and the Bank must obtain regulatory approval prior to the payment of a dividend to shareholders. Also, the Company is restricted from incurring additional debt and purchasing or redeeming treasury stock without prior regulatory approval.

The Company and the Bank's actual capital amounts and ratios as of December 31, 2011 and 2010 are presented in the following table. All dollar amounts have been rounded to the nearest thousand.


	Actual				For Capital Adequacy Purposes				To Be Well Capitalized Under Prompt Corrective Action Provisions
*As of December 31, 2011*
Total Capital to Risk Weighted Assets:
Consolidated	$	42,660,000	17.63	%	$	19,353,000	8.00	%		N/A
Bank	$	41,422,000	17.12	%	$	19,353,000	8.00	%	$	24,192,000	10.00	%
Tier 1 Capital to Risk Weighted Assets:
Consolidated	$	39,590,000	16.37	%	$	9,676,000	4.00	%		N/A
Bank	$	38,345,000	15.85	%	$	9,677,000	4.00	%	$	14,515,000	6.00	%
Tier 1 Capital to Average Assets:
Consolidated	$	39,590,000	9.70	%	$	16,324,000	4.00	%		N/A
Bank	$	38,345,000	9.40	%	$	16,318,000	4.00	%	$	20,398,000	5.00	%

As of December 31, 2010
Total Capital to Risk Weighted Assets:
Consolidated	$	48,122,000	17.16	%	$	22,436,000	8.00	%		N/A
Bank	$	43,822,000	15.68	%	$	22,361,000	8.00	%	$	27,951,000	10.00	%
Tier 1 Capital to Risk Weighted Assets:
Consolidated	$	44,537,000	15.88	%	$	11,218,000	4.00	%		N/A
Bank	$	40,249,000	14.40	%	$	11,180,000	4.00	%	$	16,771,000	6.00	%
Tier 1 Capital to Average Assets:
Consolidated	$	44,537,000	10.29	%	$	17,313,000	4.00	%		N/A
Bank	$	40,249,000	9.32	%	$	17,273,000	4.00	%	$	21,591,000	5.00	%

- Definition

The entire disclosure for banks, savings institutions, and credit unions, for regulatory capital requirements imposed by the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) or for any state imposed capital requirements, as applicable. The disclosure may include (1) a description of regulatory capital requirements (a) for capital adequacy purposes and (b) established by the prompt corrective action provisions of Section 38 of the Federal Depository Insurance Act; (2) the actual or possible material effects of noncompliance with such requirements; (3) whether the entity is in compliance with the regulatory capital requirements including (a) required and actual ratios and amounts of Tier 1 leverage, Tier 1 risk-based, and total risk-based capital, tangible capital (for savings institutions), and Tier 3 capital for market risk (for certain banks and bank holding companies), (b) factors that may significantly affect capital adequacy; (4) the prompt corrective action category in which the entity was classified as of its most recent notification; (5) whether management believes any conditions or events since notification have changed the entity's category. Also may include additional information that might be disclosed in situations where substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time.

+ References

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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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+ Details

SOUTHEASTERN BANKING CORP 10-K