REGULATORY CAPITAL

12 Months Ended

Dec. 31, 2011

REGULATORY CAPITAL

REGULATORY CAPITAL

NOTE 20 — REGULATORY CAPITAL

        Banks and bank holding companies are subject to various regulatory capital requirements administered by the federal banking agencies and are assigned to a capital category. The assigned capital category is largely determined by three ratios that are calculated according to the regulations. The ratios are intended to measure capital relative to assets and credit risk associated with those assets and off-balance sheet exposures. The capital category assigned to an entity can also be affected by qualitative judgments made by regulatory agencies about the risk inherent in the entity's activities that are not part of the calculated ratios. Failure to meet capital requirements can initiate regulatory action. Risk adjusted capital levels of the Company's subsidiary bank exceed regulatory definitions of well-capitalized institutions. During the second quarter of 2010, the Bank entered into an agreement with its regulators to maintain a Tier 1 leverage ratio of at least 8% and a total risk based capital ratio of at least 11%. (See Note 28).

        Management believes as of December 31, 2011, the Company and Bank meet all capital adequacy requirements to which they are subject. The holding company is a source of additional financial strength with its $8.0 million in cash and its ability to downstream additional capital to the Bank.

        There are five capital categories defined in the regulations, ranging from well capitalized to critically undercapitalized. Classification in any of the undercapitalized categories can result in actions by regulators that could have a material effect on operations. At December 31, 2011and 2010, the most recent regulatory notifications categorized the Bank as well capitalized under the regulatory framework for prompt corrective actions. There are no conditions or events since that notification that management believes have changed the Bank's category.

        Actual and required capital amounts and ratios are presented below.

	Actual					Required for Adequate Capital					To Comply with Regulatory Agreement
December 31, 2011	Amount		Ratio			Amount		Ratio			Amount		Ratio
MainSource Financial Group
Total capital (to risk-weighted assets)	$	313,902		18.9	%		133,201		8.0	%		N/A		N/A
Tier 1 capital (to risk-weighted assets)		293,039		17.6			66,601		4.0			N/A		N/A
Tier 1 capital (to average assets)		293,039		10.8			108,875		4.0			N/A		N/A
MainSource Bank
Total capital (to risk-weighted assets)	$	299,054		18.1	%		132,001		8.0	%		181,502		11.0	%
Tier 1 capital (to risk-weighted assets)		278,191		16.9			66,001		4.0			—		—
Tier 1 capital (to average assets)		278,191		10.3			107,675		4.0			215,350		8.0
	Actual					Required for Adequate Capital					To Comply with Regulatory Agreement
December 31, 2010	Amount		Ratio			Amount		Ratio			Amount		Ratio
MainSource Financial Group
Total capital (to risk-weighted assets)	$	293,069		16.8	%	$	139,611		8.0	%		N/A		N/A
Tier 1 capital (to risk-weighted assets)		270,998		15.5			69,806		4.0			N/A		N/A
Tier 1 capital (to average assets)		270,998		9.7			112,069		4.0			N/A		N/A
MainSource Bank
Total capital (to risk-weighted assets)	$	271,430		15.7	%	$	138,237		8.0	%	$	190,076		11.0	%
Tier 1 capital (to risk-weighted assets)		249,571		14.4			69,118		4.0			—		—
Tier 1 capital (to average assets)		249,571		9.0			110,761		4.0			221,522		8.0