STOCKHOLDERS' EQUITY
 9 Months Ended
Sep. 30, 2012
Equity [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
12. STOCKHOLDERS’ EQUITY

 

Regulatory Capital Requirements – The Corporation and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, 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 capital requirements can result in regulatory action.

 

Prompt corrective action regulations provide five classifications: 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.

 

Quantitative measures established by regulation to ensure capital adequacy require the Corporation 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 1 capital (as defined) to average assets (as defined).

 

As a result of the Consent Order the Bank entered into with the FDIC and KDFI described in greater detail in Note 2, the Bank is categorized as a "troubled institution" by bank regulators, which by definition does not permit the Bank to be considered "well-capitalized".

 

On March 9, 2012, the Bank entered into a new Consent Order with the FDIC and KDFI. The 2012 Consent Order requires the Bank to achieve the same minimum capital ratios mandated by the January 2011 Consent Order. See Note 2 for additional information.

 

Our actual and required capital amounts and ratios to be considered adequately capitalized are presented below.

  

(Dollars in thousands)               For Capital  
    Actual     Adequacy Purposes  
As of September 30, 2012:   Amount     Ratio     Amount     Ratio  
Total risk-based capital (to risk- weighted assets)                                
Consolidated   $ 72,707       11.18 %   $ 52,020       8.00 %
Bank     77,237       11.88       52,018       8.00  
Tier 1 capital (to risk-weighted assets)                                
Consolidated     61,990       9.53       26,010       4.00  
Bank     68,974       10.61       26,009       4.00  
Tier 1 capital (to average assets)                                
Consolidated     61,990       5.84       42,454       4.00  
Bank     68,974       6.50       42,469       4.00  

 

(Dollars in thousands)               For Capital  
    Actual     Adequacy Purposes  
As of December 31, 2011:   Amount     Ratio     Amount     Ratio  
Total risk-based capital (to risk- weighted assets)                                
Consolidated   $ 79,593       9.87 %   $ 64,493       8.00 %
Bank     82,081       10.18       64,486       8.00  
Tier 1 capital (to risk-weighted assets)                                
Consolidated     69,425       8.61       32,246       4.00  
Bank     71,914       8.92       32,243       4.00  
Tier 1 capital (to average assets)                                
Consolidated     69,425       5.71       48,666       4.00  
Bank     71,914       5.86       49,111       4.00  

   

The 2012 Consent Order requires the Bank to achieve the minimum capital ratios presented below:

 

    Actual as of     Ratio Required  
    9/30/2012     by Consent Order  
Total capital to risk-weighted assets     11.88 %     12.00 %
Tier 1 capital to average total assets     6.50 %     9.00 %

 

The sale of our four Louisville banking centers is projected to increase our Tier 1 capital ratio from 6.50% to over 8.00% and increase our total risk-based capital ratio from 11.88% to over 13.00% based on September 30, 2012 financial information. See Note 2 for additional information.