Annual report pursuant to Section 13 and 15(d)

Regulatory Capital

v2.4.1.9
Regulatory Capital
 12 Months Ended
Dec. 31, 2014
Banking and Thrift [Abstract]  
Regulatory Capital Requirements under Banking Regulations [Text Block]
Note 11 – Regulatory Capital
 
The Bancorp and Bank are subject to regulatory capital requirements administered by federal banking agencies. 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, 2014 and 2013, the most recent regulatory notifications categorized the Bancorp and 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 Bancorp’s or the Bank’s category.
 
At year-end, capital levels for the Bancorp and the Bank were essentially the same. Actual capital levels (in millions), minimum required levels and levels needed to be classified as well capitalized for the Bancorp are summarized below:
  
 
 
 
 
 
 
 
 
Minimum
 
 
 
 
 
 
 
 
 
Required To Be
 
 
 
 
 
 
 
 
 
Well Capitalized
 
 
 
 
 
 
Minimum Required
 
 
Under Prompt
 
 
 
 
 
 
For Capital
 
 
Corrective
 
 
 
Actual
 
 
Adequacy Purposes
 
 
Action Regulations
 
(Dollars in millions)
 
Amount
 
 
Ratio
 
 
Amount
 
 
Ratio
 
 
Amount
 
 
Ratio
 
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total capital to risk-weighted assets
 
$
78.4
 
 
 
14.8
%
 
$
42.3
 
 
 
8.0
%
 
$
52.8
 
 
 
10.0
%
Tier 1 capital to risk-weighted assets
 
$
72.0
 
 
 
13.6
%
 
$
21.1
 
 
 
4.0
%
 
$
31.7
 
 
 
6.0
%
Tier 1 capital to adjusted average assets
 
$
72.0
 
 
 
9.2
%
 
$
23.5
 
 
 
3.0
%
 
$
39.2
 
 
 
5.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total capital to risk-weighted assets
 
$
75.0
 
 
 
15.6
%
 
$
38.5
 
 
 
8.0
%
 
$
48.2
 
 
 
10.0
%
Tier 1 capital to risk-weighted assets
 
$
69.0
 
 
 
14.3
%
 
$
19.3
 
 
 
4.0
%
 
$
28.9
 
 
 
6.0
%
Tier 1 capital to adjusted average assets
 
$
69.0
 
 
 
10.0
%
 
$
20.8
 
 
 
3.0
%
 
$
34.6
 
 
 
5.0
%
 
The Bancorp’s ability to pay dividends to its shareholders is entirely dependent upon the Bank’s ability to pay dividends to the Bancorp. 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 Indiana Department of Financial Institutions (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. The aggregate amount of dividends that may be declared by the Bank in 2015, without the need for qualifying for an exemption or prior DFI approval, is $9.2 million plus 2015 net profits. 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. On November 21, 2014 the Board of Directors of the Bancorp declared a fourth quarter dividend of $0.25 per share. The Bancorp’s fourth quarter dividend was paid to shareholders on January 2, 2015.