Regulatory Matters

12 Months Ended

Dec. 31, 2011

Regulatory Matters [Abstract]

Regulatory Matters

11. REGULATORY MATTERS

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

Quantitative measures that have been established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table), of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined).  As of December 31, 2011 and 2010, the Company and the Bank met all capital adequacy requirements to which they were subject.

As of December 31, 2011, the most recent notifications from the Federal Reserve 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, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table.  There are no conditions or events since that notification that management believes have changed either entity's category.

A summary of capital amounts and ratios as of December 31, 2011 and 2010:

(dollars in thousands)

	Actual					For Capital Adequacy Purposes					To Be Categorized As "Well Capitalized" Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2011
Total risk-based capital
(to risk-weighted assets)
Indiana Bank and Trust Company	$	108,463		13.41	%	$	64,714		8.0	%	$	80,893		10.0	%
Indiana Community Bancorp Consolidated	$	110,254		13.61	%	$	64,788		8.0	%	$	80,985		10.0	%
Tier 1 risk-based capital
(to risk-weighted assets)
Indiana Bank and Trust Company	$	98,291		12.15	%	$	32,357		4.0	%	$	48,536		6.0	%
Indiana Community Bancorp Consolidated	$	100,071		12.36	%	$	32,394		4.0	%	$	48,591		6.0	%
Tier 1 leverage capital
(to average assets)
Indiana Bank and Trust Company	$	98,291		10.17	%	$	38,657		4.0	%	$	48,321		5.0	%
Indiana Community Bancorp Consolidated	$	100,071		10.35	%	$	38,687		4.0	%	$	48,359		5.0	%

	Actual					For Capital Adequacy Purposes					To Be Categorized As "Well Capitalized" Under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2010
Total risk-based capital
(to risk-weighted assets)
Indiana Bank and Trust Company	$	110,788		12.93	%	$	68,568		8.0	%	$	85,711		10.0	%
Indiana Community Bancorp Consolidated	$	114,412		13.33	%	$	68,645		8.0	%	$	85,807		10.0	%
Tier 1 risk-based capital
(to risk-weighted assets)
Indiana Bank and Trust Company	$	100,026		11.67	%	$	34,284		4.0	%	$	51,426		6.0	%
Indiana Community Bancorp Consolidated	$	103,638		12.08	%	$	34,323		4.0	%	$	51,484		6.0	%
Tier 1 leverage capital
(to average assets)
Indiana Bank and Trust Company	$	100,026		9.27	%	$	43,169		4.0	%	$	53,961		5.0	%
Indiana Community Bancorp Consolidated	$	103,638		9.60	%	$	43,203		4.0	%	$	54,003		5.0	%

Dividend Restrictions

The principal source of income and funds for the Company is dividends from the Bank. At the request of its regulators, the Bank's Board of Directors has adopted regulations requiring the approval of the DFI and the Federal Reserve before any Bank declaration of dividends. The Bank did not request regulatory approval to pay any dividends to the Company for the years ended December 2011 and December 2010.

Additionally, eligible deposit account holders at the time of conversion, January 14, 1988, were granted priority in the event of a future liquidation of the Bank.  Consequently, a special reserve account was established equal to the Bank's $9.4 million equity at December 31, 1986.  No dividends may be paid to shareholders or outstanding shares repurchased if such payments reduce the equity of the Bank below the amount required for the liquidation account.

On December 12, 2008, Indiana Community Bancorp issued 21,500 shares of the Company's Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the "Series A Preferred Stock") and a warrant to purchase 188,707 shares of the Company's common stock, without par value (the "Common Stock"), for an aggregate purchase price of $21.5 million in cash. Pursuant to the Certificate of Designations for the Series A Preferred Stock, the ability of the Company to declare or pay dividends or distributions on, or repurchase, redeem or otherwise acquire for consideration, shares of its Common Stock will be subject to restrictions in the event that the Company fails to declare and pay full dividends (or declare and set aside a sum sufficient for payment thereof) on its Series A Preferred Stock.  ONB has agreed in its previously disclosed merger agreement with the Company to fund the redemption of the TARP preferred stock on or before the closing of the merger, subject to regulatory approval.