Annual report [Section 13 and 15(d), not S-K Item 405]

Regulatory Capital

v3.26.1
Regulatory Capital
 12 Months Ended
Dec. 31, 2025
Regulated Operations [Abstract]  
Regulatory Capital Regulatory Capital
The Bank is subject to regulatory capital guidelines adopted by the FDIC. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet various capital requirements can initiate regulatory action. Prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At December 31, 2025, and 2024, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank’s category.
In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions by the institution and certain discretionary bonus payments to management if an institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements.
In addition, the following table shows that, at December 31, 2025 and December 31, 2024, the Bank’s capital exceeded all applicable regulatory capital requirements as set forth in 12 C.F.R. § 324.
(Dollars in thousands) Actual Minimum Required For
Capital Adequacy Purposes		 Minimum Required To Be
Well Capitalized Under Prompt
Corrective Action Regulations
December 31, 2025 Amount Ratio Amount Ratio Amount Ratio
Common equity tier 1 capital to risk-weighted assets $ 186,214  11.86 % $ 70,626  4.50 % $ 102,016  6.50 %
Tier 1 capital to risk-weighted assets $ 186,214  11.86 % $ 94,168  6.00 % $ 125,558  8.00 %
Total capital to risk-weighted assets $ 205,472  13.09 % $ 125,558  8.00 % $ 156,947  10.00 %
Tier 1 leverage ratio $ 186,214  8.93 % $ 83,379  4.00 % $ 104,223  5.00 %
(Dollars in thousands) Actual Minimum Required For
Capital Adequacy Purposes		 Minimum Required To Be
Well Capitalized Under Prompt
Corrective Action Regulations
December 31, 2024 Amount Ratio Amount Ratio Amount Ratio
Common equity tier 1 capital to risk-weighted assets $ 179,625  11.26 % $ 71,771  4.50 % $ 103,670  6.50 %
Tier 1 capital to risk-weighted assets $ 179,625  11.26 % $ 95,695  6.00 % $ 127,594  8.00 %
Total capital to risk-weighted assets $ 194,499  12.19 % $ 127,594  8.00 % $ 159,492  10.00 %
Tier 1 leverage ratio $ 179,625  8.47 % $ 84,854  4.00 % $ 106,068  5.00 %
The Company’s ability to pay dividends to its shareholders is largely dependent upon the Bank’s ability to pay dividends to the Company. Under Indiana law, the Bank may pay dividends from its undivided profits (generally, earnings less losses, bad debts, taxes and other operating expenses) as is considered expedient by the Bank’s Board of Directors. However, the Bank must obtain the approval of the DFI if the total of all dividends declared by the Bank during the current year, including the proposed dividend, would exceed the sum of retained net income for the year to date plus its retained net income for the previous two years. For this purpose, “retained net income,” means net income as calculated for call report purposes, less all dividends declared for the applicable period. An exemption from DFI approval would require that the Bank have been assigned a composite uniform financial institutions rating of 1 or 2 as a result of the most recent federal or state examination; the proposed dividend would not result in a Tier 1 leverage ratio below 7.5%; and that the Bank not be subject to any corrective action, supervisory order, supervisory agreement, or board approved operating agreement. In addition, under the terms of the MOU, the Bank must seek regulatory approval prior to paying cash dividends. The MOU documents an understanding among the Bank, the FDIC, and DFI that, among other things, the Bank will: refrain from paying cash dividends without prior regulatory approval. Moreover, the FDIC and the Federal Reserve Board may prohibit the payment of dividends if it determines that the payment of dividends would constitute an unsafe or unsound practice in light of the financial condition of the Bank. The aggregate amount of dividends that the Bank was eligible to declare in 2025, without the need for qualifying for a further exemption or prior DFI approval, was its 2025 net income. On December 3, 2025, the Board of Directors of the Company declared the most recent quarterly dividend of $0.12 per share. The Company’s quarterly dividend was paid to shareholders on December 30, 2025 to shareholders of record on December 17, 2025.