REGULATORY CAPITAL

6 Months Ended

Jun. 30, 2011

REGULATORY CAPITAL

REGULATORY CAPITAL

NOTE 9 — 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. 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%, both of which are higher than the levels required for adequate capitalization.  (See Note 10 below).

Actual and required capital amounts and ratios are presented below:

					Required for			To Comply with
	Actual				Adequate Capital			Regulatory Agreement
June 30, 2011	Amount		Ratio		Amount	Ratio		Amount	Ratio
MainSource Financial Group
Total capital (to risk-weighted assets)	$	303,622	18.0	%	195,133	8.0	%	N/A	N/A
Tier 1 capital (to risk-weighted assets)	282,383		16.7		67,567	4.0		N/A	N/A
Tier 1 capital (to average assets)	282,383		10.3		110,087	4.0		N/A	N/A
MainSource Bank
Total capital (to risk-weighted assets)	286,805		17.1	%	134,310	8.0	%	184,708	11.0	%
Tier 1 capital (to risk-weighted assets)	265,566		15.8		67,155	4.0		—	—
Tier 1 capital (to average assets)	265,566		9.8		108,894	4.0		217,775	8.0

					Required for			To Comply with
	Actual				Adequate Capital			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

Management believes as of June 30, 2011, the Company and the Bank meet all capital adequacy requirements to which they are subject to be considered well-capitalized. The holding company is a source of additional financial strength to the Bank with its $8,000 in cash and its ability to downstream additional capital to the Bank.