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Note 17 - Regulatory Capital Requirements and Restrictions on Dividends

12 Months Ended

Dec. 31, 2024

Regulatory Capital Requirements and Restrictions on Dividends

Note 17. Regulatory Capital Requirements and Restrictions on Dividends

The Company (on a consolidated basis) and the subsidiary banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company and subsidiary banks’ financial statements.

Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the subsidiary banks must meet specific capital guidelines that involve quantitative measures of their 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 weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Company and the subsidiary banks to maintain minimum amounts and ratios (set forth in the following table) of total common equity Tier 1 and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets, each as defined by regulation. Management believes, as of December 31, 2024 and 2023, that the Company and the subsidiary banks met all capital adequacy requirements to which they are subject.

Under the regulatory framework for prompt corrective action, to be categorized as “well capitalized,” an institution must maintain minimum total risk-based, Tier 1 risk-based, Tier 1 leverage and common equity Tier 1 ratios as set forth in the following tables. The Company and the subsidiary banks’ actual capital amounts and ratios as of December 31, 2024 and 2023 are also presented in the following table (dollars in thousands). As of December 31, 2024 and 2023, the subsidiary banks met the requirements to be “well capitalized.”


										For Capital Adequacy					To Be Well Capitalized
					For Capital					Purposes With Capital					Under Prompt Corrective
	Actual				Adequacy Purposes					Conservation Buffer					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio		Amount			Ratio

	( dollars in thousands)
As of December 31, 2024:
Company:
Total risk-based capital	$	1,273,903	14.10	%	$	723,016	>	8.00	%	$	948,958	>	10.50	%	$	903,770	>	10.00	%
Tier 1 risk-based capital		955,039	10.57			542,262	>	6.00			768,204	>	8.50			723,016	>	8.00
Tier 1 leverage		955,039	10.73			356,091	>	4.00			356,091	>	4.00			445,114	>	5.00
Common equity Tier 1		906,179	10.03			406,696	>	4.50			632,639	>	7.00			587,450	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	323,221	13.65	%	$	189,365	>	8.00	%	$	248,541	>	10.50	%	$	236,706	>	10.00	%
Tier 1 risk-based capital		293,597	12.40			142,024	>	6.00			201,200	>	8.50			189,365	>	8.00
Tier 1 leverage		293,597	11.41			102,969	>	4.00			102,969	>	4.00			128,712	>	5.00
Common equity Tier 1		293,597	12.40			106,518	>	4.50			165,694	>	7.00			153,859	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	452,942	14.79	%	$	245,055	>	8.00	%	$	321,635	>	10.50	%	$	306,319	>	10.00	%
Tier 1 risk-based capital		424,253	13.85			183,792	>	6.00			260,371	>	8.50			245,055	>	8.00
Tier 1 leverage		424,253	16.40			103,449	>	4.00			103,449	>	4.00			129,312	>	5.00
Common equity Tier 1		424,253	13.85			137,844	>	4.50			214,424	>	7.00			199,108	>	6.50
Community State Bank:
Total risk-based capital	$	189,362	12.94	%	$	117,065	>	8.00	%	$	153,648	>	10.50	%	$	146,332	>	10.00	%
Tier 1 risk-based capital		176,646	12.07			87,799	>	6.00			124,382	>	8.50			117,065	>	8.00
Tier 1 leverage		176,646	11.72			60,305	>	4.00			60,305	>	4.00			75,382	>	5.00
Common equity Tier 1		176,646	12.07			65,849	>	4.50			102,432	>	7.00			95,115	>	6.50
Guaranty Bank:
Total risk-based capital	$	297,047	14.26	%	$	166,695	>	8.00	%	$	218,787	>	10.50	%	$	208,369	>	10.00	%
Tier 1 risk-based capital		272,621	13.08			125,021	>	6.00			177,113	>	8.50			166,695	>	8.00
Tier 1 leverage		272,621	12.15			89,770	>	4.00			89,770	>	4.00			112,213	>	5.00
Common equity Tier 1		272,621	13.08			93,766	>	4.50			145,858	>	7.00			135,440	>	6.50

Note 17. Regulatory Capital Requirements and Restrictions on Dividends (continued)


										For Capital Adequacy					To Be Well Capitalized
					For Capital					Purposes With Capital					Under Prompt Corrective
	Actual				Adequacy Purposes					Conservation Buffer					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio		Amount			Ratio

	( dollars in thousands)
As of December 31, 2023:
Company:
Total risk-based capital	$	1,171,047	14.29	%	$	655,461	>	8.00	%	$	860,293	>	10.50	%	$	819,327	>	10.00	%
Tier 1 risk-based capital		841,052	10.27			491,596	>	6.00			696,428	>	8.50			655,461	>	8.00
Tier 1 leverage		841,052	10.03			335,420	>	4.00			335,420	>	4.00			419,275	>	5.00
Common equity Tier 1		792,321	9.67			368,697	>	4.50			573,529	>	7.00			532,562	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	300,413	12.67	%	$	189,707	>	8.00	%	$	248,990	>	10.50	%	$	237,133	>	10.00	%
Tier 1 risk-based capital		270,744	11.42			142,280	>	6.00			201,563	>	8.50			189,707	>	8.00
Tier 1 leverage		270,744	11.23			96,425	>	4.00			96,425	>	4.00			120,531	>	5.00
Common equity Tier 1		270,744	11.42			106,710	>	4.50			165,993	>	7.00			154,137	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	381,514	15.60	%	$	195,687	>	8.00	%	$	256,840	>	10.50	%	$	244,609	>	10.00	%
Tier 1 risk-based capital		354,940	14.51			146,766	>	6.00			207,918	>	8.50			195,687	>	8.00
Tier 1 leverage		354,940	14.77			96,093	>	4.00			96,093	>	4.00			120,116	>	5.00
Common equity Tier 1		354,940	14.51			110,074	>	4.50			171,227	>	7.00			158,996	>	6.50
Community State Bank:
Total risk-based capital	$	171,747	13.22	%	$	103,903	>	8.00	%	$	136,372	>	10.50	%	$	129,878	>	10.00	%
Tier 1 risk-based capital		156,629	12.06			77,927	>	6.00			110,397	>	8.50			103,903	>	8.00
Tier 1 leverage		156,629	11.19			56,005	>	4.00			56,005	>	4.00			70,007	>	5.00
Common equity Tier 1		156,629	12.06			58,445	>	4.50			90,915	>	7.00			84,421	>	6.50
Guaranty Bank:
Total risk-based capital	$	267,822	12.68	%	$	168,967	>	8.00	%	$	221,770	>	10.50	%	$	211,209	>	10.00	%
Tier 1 risk-based capital		244,506	11.58			126,726	>	6.00			179,528	>	8.50			168,967	>	8.00
Tier 1 leverage		244,506	11.41			85,688	>	4.00			85,688	>	4.00			107,110	>	5.00
Common equity Tier 1		244,506	11.58			95,044	>	4.50			147,847	>	7.00			137,286	>	6.50

The Company’s ability to pay dividends to its stockholders may be affected by both general corporate law considerations and policies of the Federal Reserve applicable to bank holding companies.

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. Notwithstanding the availability of funds for dividends, however, the Federal Reserve may prohibit the payment of any dividends by the subsidiary banks if the Federal Reserve determines such payment would constitute an unsafe or unsound practice.

The Company also has certain contractual restrictions on its ability to pay dividends. The Company has issued junior subordinated debentures in four private placements and assumed four issues of junior subordinated debentures in connection with the acquisitions. Under the terms of the debentures, the Company may be prohibited, under certain circumstances, from paying dividends on shares of its common stock. These circumstances did not exist at December 31, 2024 or 2023.

On February 13, 2020, the board of directors of the Company approved a share repurchase program under which the Company was authorized to repurchase, from time to time as the Company deemed appropriate, up to 800,000 shares of its outstanding common stock, or approximately 5% of the outstanding shares as of December 31, 2019. On May 19, 2022, the board of directors of the Company approved a share repurchase program under which the Company is authorized to repurchase, from time to time as the Company deems appropriate, up to an additional 1,500,000 shares of its outstanding common stock, or approximately 10% of the outstanding shares as of December 31, 2021. There were no shares and 175,000 shares of common stock purchased by the Company pursuant to these plans during the year ended December 31, 2024 and 2023, respectively. There were 760,915 shares of common stock remaining for repurchase pursuant to these plans as of December 31, 2024 and 2023.

- 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.

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