STOCKHOLDERS EQUITY

9 Months Ended

Sep. 30, 2011

NOTE 7. STOCKHOLDERS’ EQUITY

Banking regulations limit the amount of dividends that may be paid without prior approval of regulatory agencies. Under these regulations, the amount of dividends that may be paid in any calendar year is limited to the current year’s net income, as defined, combined with the retained earnings of the preceding two years, subject to the capital requirements as defined below.

The Bank is subject to various regulatory capital requirements administered by the state and federal banking agencies. Failure to meet the minimum regulatory capital requirements can initiate certain mandatory, and possible additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines involving quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification under the prompt corrective action guidelines are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital to risk-weighted assets (as defined in the regulations), and of Tier 1 capital to average assets (as defined). Management believes, as of September 30, 2011 (unaudited) and December 31, 2010, that the Bank meets all the capital adequacy requirements to which it is subject.

As of July 21, 2011, the date of the most recent notification from the West Virginia Division of Banking, the Bank was categorized as well capitalized under the regulatory framework for prompt corrective action. As of September 30, 2011 (unaudited) and December 31, 2010, the Bank is categorized as well capitalized as disclosed in the following table. The Bank’s actual and required capital amounts and ratios as of September 30, 2011 (unaudited) and December 31, 2010 are as follows:

									To Be Well
									Capitalized
									Under The Prompt
					For Capital				Corrective
	Actual				Adequacy Purposes				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio

September 30, 2011 (unaudited):
Total Risk-Based Capital (to Risk-Weighted Assets)	$	41,354	12.0	%	$	27,501	8	%	$	34,376	10	%

Tier l Capital (to Risk-Weighted Assets)		37,036	10.8	%		13,755	4	%		20,633	6	%

Tier l Capital (to Adjusted Total Assets)		37,036	7.6	%		19,544	4	%		24,430	5	%

									To Be Well
									Capitalized
									Under The Prompt
					For Capital				Corrective
	Actual				Adequacy Purposes				Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio

December 31, 2010:
Total Risk-Based Capital (to Risk-Weighted Assets)	$	39,770	11.6	%	$	27,381	8	%	$	34,226	10	%

Tier l Capital (to Risk-Weighted Assets)		35,484	10.4	%		13,688	4	%		20,531	6	%

Tier l Capital (to Adjusted Total Assets)		35,484	7.2	%		19,741	4	%		24,676	5	%

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

+ References

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+ Details

First Sentry Bancshares, Inc. 10-Q