Condensed Statements of Cash Flows  98  Dividends paid by the Company are provided through dividends from the Bank. At December 31, 2012, the Bank  could distribute dividends of up to $2.0 million without regulatory approvals. The primary source of funds for the Company  is dividends from the Bank. Under the National Bank Act, a national bank may pay dividends out of its undivided profits in  such amounts and at such times as the bank’s board of directors deems prudent. Without prior OCC approval, however, a  national bank may not pay dividends in any calendar year that, in the aggregate, exceed the bank’s year-to-date net income  plus the bank’s retained net income for the two preceding years. The payment of dividends by any financial institution is  affected by the requirement to maintain adequate capital pursuant to applicable capital adequacy guidelines and regulations,  and a financial institution generally is prohibited from paying any dividends if, following payment thereof, the institution  would be undercapitalized.  (Dollars in thousands) 2012 2011 2010 Cash flows from operating activities: Net earnings  6,367 $ 4,484 $ 2,043 $ (Increase)/decrease in undistributed equity of Bank (1,858) (367) 260 Loss on impairment of investment securities - 72 9 Gain on sale of investment securities (9) - - Other 68 (30) (50) Net cash provided by operating activities 4,568 4,159 2,262 Cash flows from investing activities: Purchase of investment securities - - (74) Proceeds from sales and maturities of investment securities 28 - - Net cash provided by (used in) investing activities 28 - (74) Cash flows from financing activities: Issuance of shares under stock option plan 5 57 228 Proceeds from other borrowings 2,600 2,485 2,398 Repayments on other borrowings (4,240) (4,685) (2,910) Payment of dividends (2,121) (2,014) (1,908) Net cash used in financing activities (3,756) (4,157) (2,192) Net increase (decrease) in cash 840 2 (4) Cash at beginning of year 15 13 17 Cash at end of year 855 $ 15 $ 13 $ Years ended December 31,