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CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS
 12 Months Ended
Dec. 31, 2013
Capital Requirements and Restrictions On Retained Earnings [Abstract]  
CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS
NOTE 16 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS
 
The Company became a financial holding company effective May 30, 2012 and is now required to be well capitalized under the applicable regulatory guidelines. The Company and the Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet certain heightened minimum capital requirements can initiate certain mandatory, and possibly discretionary, actions by regulators that, if undertaken, could have a direct material effect on the financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting and other factors.
 
Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum capital amounts and ratios (set forth in the following table) of Total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined in the regulation), and of Tier I capital (as defined in the regulation) to average assets (as defined). Management believes, as of the years ended December 31, 2013 and 2012, that the Company and the Bank met all capital adequacy requirements to which they are subject.
 
As of December 31, 2013, the most recent notification from the federal regulators categorized the Company and the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company and the Bank must maintain minimum Total risk-based capital ratios, Tier I risk-based capital ratios and Tier I leverage capital ratios as set forth in the table. There have been no conditions or events since that notification that management believes have changed the Company and the Bank’s category.
 
 
 
 
 
 
 
 
 
 
 
 
Minimum Required to
 
 
 
 
 
 
 
 
 
Minimum
Required
 
 
Be Well Capitalized
 
 
 
 
 
 
 
 
 
For Capital
 
 
Under Prompt
Corrective
 
 
 
Actual
 
 
Adequacy
Purposes
 
 
Action Regulations
 
(dollars in thousands)
 
Amount
 
 
Ratio
 
 
Amount
 
 
Ratio
 
 
Amount
 
 
Ratio
 
As of December 31, 2013:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Capital (to Risk
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Assets)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
382,951
 
 
 
14.23
%
 
$
215,229
 
 
 
8.00
%
 
$
269,036
 
 
 
10.00
%
Bank
 
$
373,685
 
 
 
13.92
%
 
$
214,704
 
 
 
8.00
%
 
$
268,380
 
 
 
10.00
%
Tier I Capital (to Risk
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Assets)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
349,134
 
 
 
12.98
%
 
$
107,614
 
 
 
4.00
%
 
$
161,422
 
 
 
6.00
%
Bank
 
$
339,949
 
 
 
12.67
%
 
$
107,352
 
 
 
4.00
%
 
$
161,028
 
 
 
6.00
%
Tier I Capital (to Average Assets)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
349,134
 
 
 
11.25
%
 
$
124,152
 
 
 
4.00
%
 
$
155,190
 
 
 
5.00
%
Bank
 
$
339,949
 
 
 
10.98
%
 
$
123,809
 
 
 
4.00
%
 
$
154,761
 
 
 
5.00
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2012:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Capital (to Risk
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Assets)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
347,524
 
 
 
14.27
%
 
$
194,795
 
 
 
8.00
%
 
$
243,494
 
 
 
10.00
%
Bank
 
$
340,189
 
 
 
14.00
%
 
$
194,401
 
 
 
8.00
%
 
$
243,001
 
 
 
10.00
%
Tier I Capital (to Risk
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted Assets)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
316,816
 
 
 
13.01
%
 
$
97,398
 
 
 
4.00
%
 
$
146,096
 
 
 
6.00
%
Bank
 
$
309,542
 
 
 
12.74
%
 
$
97,200
 
 
 
4.00
%
 
$
145,800
 
 
 
6.00
%
Tier I Capital (to Average Assets)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated
 
$
316,816
 
 
 
10.46
%
 
$
121,197
 
 
 
4.00
%
 
$
151,496
 
 
 
5.00
%
Bank
 
$
309,542
 
 
 
10.28
%
 
$
120,471
 
 
 
4.00
%
 
$
150,589
 
 
 
5.00
%
 
The Bank is required to obtain the approval of the Indiana Department of Financial Institutions for the payment of any dividend if the total amount of all dividends declared by the Bank during the calendar year, including the proposed dividend, would exceed the sum of the retained net income for the year-to-date combined with the retained net income for the previous two years. Indiana law defines “retained net income” to mean the net income of a specified period, calculated under the consolidated report of income instructions, less the total amount of all dividends declared for the specified period. As of December 31, 2013, approximately $53.0 million was available to be paid as dividends to the Company by the Bank.
 
The payment of dividends by any financial institution or its holding company 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. As described above, the Bank exceeded its minimum capital requirements under applicable guidelines as of December 31, 2013. Notwithstanding the availability of funds for dividends, however, the FDIC may prohibit the payment of any dividends by the Bank if the FDIC determines such payment would constitute an unsafe or unsound practice.