Regulatory Matters

12 Months Ended

Dec. 31, 2017

Regulatory Capital Requirements [Abstract]

Regulatory Matters

Regulatory Matters

The Company is subject to various regulatory capital requirements administered by the Federal banking agencies. Failure to meet minimum capital requirements can result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification are subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios of total capital, Tier 1 capital, and common equity Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. The Company believes that it meets all capital adequacy requirements to which it is subject.

The most recent notification from the Federal bank regulators categorized 1st Source Bank, the largest of its subsidiaries, as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized” the Bank must maintain minimum total risk-based, Tier 1 risk-based, common equity Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since that notification that the Company believes will have changed the institution’s category.

As discussed in Note 12, the capital securities held by the Capital Trusts qualify as Tier 1 capital under Federal Reserve Board guidelines. The following table shows the actual and required capital amounts and ratios for 1st Source Corporation and 1st Source Bank as of December 31, 2017 and 2016.

	Actual				Minimum Capital Adequacy				Minimum Capital Adequacy with Capital Buffer(1)				To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
2017
Total Capital (to Risk-Weighted Assets):
1st Source Corporation	$	764,853	14.70	%	$	416,174	8.00	%	$	481,201	9.25	%	$	520,218	10.00	%
1st Source Bank	696,248		13.36		416,902		8.00		482,043		9.25		521,127		10.00
Tier 1 Capital (to Risk-Weighted Assets):
1st Source Corporation	699,420		13.44		312,131		6.00		377,158		7.25		416,174		8.00
1st Source Bank	630,702		12.10		312,676		6.00		377,817		7.25		416,902		8.00
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
1st Source Corporation	642,420		12.35		234,098		4.50		299,125		5.75		338,142		6.50
1st Source Bank	630,702		12.10		234,507		4.50		299,648		5.75		338,733		6.50
Tier 1 Capital (to Average Assets):
1st Source Corporation	699,420		12.17		229,890		4.00		N/A		N/A		287,362		5.00
1st Source Bank	630,702		10.98		229,789		4.00		N/A		N/A		287,236		5.00
2016
Total Capital (to Risk-Weighted Assets):
1st Source Corporation	$	713,498	15.12	%	$	377,432	8.00	%	$	406,919	8.625	%	$	471,791	10.00	%
1st Source Bank	662,531		14.06		377,014		8.00		406,468		8.625		471,267		10.00
Tier 1 Capital (to Risk-Weighted Assets):
1st Source Corporation	651,006		13.80		283,074		6.00		312,561		6.625		377,432		8.00
1st Source Bank	603,022		12.80		282,760		6.00		312,214		6.625		377,014		8.00
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
1st Source Corporation	594,006		12.59		212,306		4.50		241,793		5.125		306,664		6.50
1st Source Bank	603,022		12.80		212,070		4.50		241,524		5.125		306,324		6.50
Tier 1 Capital (to Average Assets):
1st Source Corporation	651,006		12.11		215,115		4.00		N/A		N/A		268,893		5.00
1st Source Bank	603,022		11.22		214,949		4.00		N/A		N/A		268,686		5.00

(1) The capital conservation buffer requirement will be phased in over three years beginning in 2016. The capital buffer requirement effectively raises the minimum required common equity Tier 1 capital ratio to 7.0%, the Tier 1 capital ratio to 8.5%, and the total capital ratio to 10.5% on a fully phased-in basis.

The Bank was not required to maintain noninterest bearing cash balances with the Federal Reserve Bank as of December 31, 2017 and 2016.

Dividends that may be paid by a subsidiary bank to the parent company are subject to certain legal and regulatory limitations and also may be affected by capital needs, as well as other factors.

Due to the Company’s mortgage activities, 1st Source Bank is required to maintain minimum net worth capital requirements established by various governmental agencies. 1st Source Bank’s net worth requirements are governed by the Department of Housing and Urban Development and GNMA. As of December 31, 2017, 1st Source Bank met its minimum net worth capital requirements.