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Note 12 - Regulatory Capital | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Regulatory Capital Requirements under Banking Regulations [Text Block] | Note 1 2 – 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, 2019 and 2018, 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. 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. The capital conservation buffer requirement was phased in beginning January 1, 2016 at 0.625% of risk-weighted assets and increased each year until the buffer requirement became fully effective on January 1, 2019. The following table shows that, at December 31, 2019, and December 31, 2018, the Bancorp’s capital exceeded all applicable regulatory capital requirements. The dollar amounts are in millions.
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Minimum Required To Be |
|  |  |  |  |  |  |  |  |  | Minimum Required For |  |  | Well Capitalized Under Prompt |
|  | Actual |  |  | Capital Adequacy Purposes |  |  | Corrective Action Regulations |
At December 31, 2019 |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |
Common equity tier 1 capital to risk-weighted assets |  | $ | 110.8 |  |  |  | 11.8% |  |  | $ | 42.4 |  |  |  | 4.5% |  |  |  | N/A |  |  |  | N/A |
Tier 1 capital to risk-weighted assets |  | $ | 110.8 |  |  |  | 11.8% |  |  | $ | 56.5 |  |  |  | 6.0% |  |  |  | N/A |  |  |  | N/A |
Total capital to risk-weighted assets |  | $ | 119.8 |  |  |  | 12.7% |  |  | $ | 75.3 |  |  |  | 8.0% |  |  |  | N/A |  |  |  | N/A |
Tier 1 capital to adjusted average assets |  | $ | 110.8 |  |  |  | 8.5% |  |  | $ | 52.3 |  |  |  | 4.0% |  |  |  | N/A |  |  |  | N/A |
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Minimum Required To Be |
|  |  |  |  |  |  |  |  |  | Minimum Required For |  |  | Well Capitalized Under Prompt |
|  | Actual |  |  | Capital Adequacy Purposes |  |  | Corrective Action Regulations |
At December 31, 2018 |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |
Common equity tier 1 capital to risk-weighted assets |  | $ | 92.8 |  |  |  | 11.6% |  |  | $ | 26.1 |  |  |  | 4.5% |  |  |  | N/A |  |  |  | N/A |
Tier 1 capital to risk-weighted assets |  | $ | 92.8 |  |  |  | 11.6% |  |  | $ | 42.2 |  |  |  | 6.0% |  |  |  | N/A |  |  |  | N/A |
Total capital to risk-weighted assets |  | $ | 100.8 |  |  |  | 12.6% |  |  | $ | 64.2 |  |  |  | 8.0% |  |  |  | N/A |  |  |  | N/A |
Tier 1 capital to adjusted average assets |  | $ | 92.8 |  |  |  | 8.6% |  |  | $ | 43.2 |  |  |  | 4.0% |  |  |  | N/A |  |  |  | N/A |
In addition, the following table shows that, at December 31, 2019, and December 31, 2018, the Bank’s capital exceeded all applicable regulatory capital requirements. The dollar amounts are in millions.
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Minimum Required To Be |
|  |  |  |  |  |  |  |  |  | Minimum Required For |  |  | Well Capitalized Under Prompt |
|  | Actual |  |  | Capital Adequacy Purposes |  |  | Corrective Action Regulations |
At December 31, 2019 |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |
Common equity tier 1 capital to risk-weighted assets |  | $ | 108.9 |  |  |  | 11.6% |  |  | $ | 42.4 |  |  |  | 4.5% |  |  | $ | 61.2 |  |  |  | 6.5% |
Tier 1 capital to risk-weighted assets |  | $ | 108.9 |  |  |  | 11.6% |  |  | $ | 56.5 |  |  |  | 6.0% |  |  | $ | 75.3 |  |  |  | 8.0% |
Total capital to risk-weighted assets |  | $ | 117.9 |  |  |  | 12.5% |  |  | $ | 75.3 |  |  |  | 8.0% |  |  | $ | 94.1 |  |  |  | 10.0% |
Tier 1 capital to adjusted average assets |  | $ | 108.9 |  |  |  | 8.3% |  |  | $ | 52.3 |  |  |  | 4.0% |  |  | $ | 65.3 |  |  |  | 5.0% |
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Minimum Required To Be |
|  |  |  |  |  |  |  |  |  | Minimum Required For |  |  | Well Capitalized Under Prompt |
|  | Actual |  |  | Capital Adequacy Purposes |  |  | Corrective Action Regulations |
At December 31, 2018 |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |
Common equity tier 1 capital to risk-weighted assets |  | $ | 89.9 |  |  |  | 11.2% |  |  | $ | 36.2 |  |  |  | 4.5% |  |  | $ | 52.2 |  |  |  | 6.5% |
Tier 1 capital to risk-weighted assets |  | $ | 89.9 |  |  |  | 11.2% |  |  | $ | 48.2 |  |  |  | 6.0% |  |  | $ | 64.3 |  |  |  | 8.0% |
Total capital to risk-weighted assets |  | $ | 97.9 |  |  |  | 12.2% |  |  | $ | 64.3 |  |  |  | 8.0% |  |  | $ | 80.3 |  |  |  | 10.0% |
Tier 1 capital to adjusted average assets |  | $ | 89.9 |  |  |  | 8.4% |  |  | $ | 42.9 |  |  |  | 4.0% |  |  | $ | 53.6 |  |  |  | 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 2020, without the need for qualifying for an exemption or prior DFI approval, is its 2020 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 22, 2019 the Board of Directors of the Bancorp declared a fourth quarter dividend of $0.31 per share. The Bancorp’s fourth quarter dividend was paid to shareholders on January 7, 2020.

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- Definition The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1C -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958572-112826 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1D -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958573-112826 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958570-112826 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958569-112826 Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1G -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958577-112826 Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1F -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958575-112826 Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1E -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958574-112826 Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=117337116&loc=SL5958568-112826 Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1H -URI http://asc.fasb.org/extlink&oid=117337116&loc=d3e65071-112826 + Details
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