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Note 14 - Regulatory Matters

12 Months Ended

Dec. 31, 2021

Regulatory Capital Requirements under Banking Regulations [Text Block]

Note 14. Regulatory Matters

The Company and the 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 possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and Banks’ financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the 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. Regulators also have the ability to impose higher limits than those specified by capital adequacy guidelines if they so deem necessary. Management believes, as of December 31, 2021 and 2020, that the Company and each subsidiary bank met all capital adequacy requirements to which they are subject.

The Company’s and each of the subsidiary bank’s actual capital amounts and ratios as of December 31, 2021 and 2020 are also presented in the tables. (dollars in thousands)

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

As of December 31, 2021:
Total capital (to risk- weighted assets):
Consolidated	$	208,480		14.8	%	$	146,881		10.50	%		N/A		N/A
Boone Bank & Trust		15,603		14.2			11,562		10.50			11,012		10.0	%
First National Bank		104,608		14.5			75,832		10.50			72,221		10.0
Iowa State Savings Bank		24,008		15.9			15,895		10.50			15,138		10.0
Reliance State Bank		27,292		13.6			21,136		10.50			20,129		10.0
State Bank & Trust		20,885		15.2			14,416		10.50			13,730		10.0
United Bank & Trust		12,001		15.7			8,039		10.50			7,657		10.0

Tier 1 capital (to risk- weighted assets):
Consolidated	$	191,161		13.7	%	$	118,904		8.50	%		N/A		N/A
Boone Bank & Trust		14,652		13.3			9,360		8.50			8,809		8.0	%
First National Bank		95,573		13.2			61,388		8.50			57,777		8.0
Iowa State Savings Bank		22,747		15.0			12,868		8.50			12,111		8.0
Reliance State Bank		24,774		12.3			17,110		8.50			16,103		8.0
State Bank & Trust		19,231		14.0			11,670		8.50			10,984		8.0
United Bank & Trust		11,042		14.4			6,508		8.50			6,125		8.0

Tier 1 capital (to average- assets):
Consolidated	$	191,161		9.0	%	$	84,585		4.00	%		N/A		N/A
Boone Bank & Trust		14,652		9.0			6,525		4.00			8,157		5.0	%
First National Bank		95,573		8.7			44,333		4.00			55,416		5.0
Iowa State Savings Bank		22,747		9.1			10,102		4.00			12,628		5.0
Reliance State Bank		24,774		8.8			11,396		4.00			14,245		5.0
State Bank & Trust		19,231		9.1			8,469		4.00			10,586		5.0
United Bank & Trust		11,042		8.9			4,955		4.00			6,193		5.0

Common equity tier 1 capital (to risk-weighted assets):
Consolidated	$	191,161		13.7	%	$	97,921		7.00	%		N/A		N/A
Boone Bank & Trust		14,652		13.3			7,708		7.00			7,158		6.5	%
First National Bank		95,573		13.2			50,555		7.00			46,944		6.5
Iowa State Savings Bank		22,747		15.0			10,597		7.00			9,840		6.5
Reliance State Bank		24,774		12.3			14,091		7.00			13,084		6.5
State Bank & Trust		19,231		14.0			9,611		7.00			8,924		6.5
United Bank & Trust		11,042		14.4			5,360		7.00			4,977		6.5

* These ratios for December 31, 2021 include a capital conservation buffer of 2.50% for capital adequacy purposes, except for the Tier 1 capital to average assets ratios.

						To Be Well
						Capitalized Under
						Prompt Corrective
	Actual					Action Provisions
	Amount		Ratio			Amount		Ratio

As of December 31, 2020:
Community Bank Leverage Ratio:
(Tier 1 capital to average assets)
Boone Bank & Trust	$	13,967		9.2	%	$	12,170		8.0	%
First National Bank		86,071		8.6			80,393		8.0
Iowa State Savings Bank		21,610		9.4			18,321		8.0
Reliance State Bank		23,278		9.4			19,741		8.0
State Bank & Trust		16,564		8.5			15,657		8.0
United Bank & Trust		10,539		9.2			9,180		8.0

The Company and the Banks are subject to the rules of the Basel III regulatory capital framework and related Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules include the implementation of a 2.5 percent capital conservation buffer that is added to the minimum requirements for capital adequacy purposes. A banking organization with a capital conservation buffer of less than the required amount will be subject to limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers. At December 31, 2021, the capital ratios for the Company and the Banks were sufficient to meet the conservation buffer.

On March 31, 2020, the Banks qualified for the community bank leverage ratio (CBLR) framework. In order to qualify for the CBLR framework, a community banking organization must have a tier 1 leverage ratio of greater than 9 percent, less than $10 billion in total consolidated assets, and limited amounts of off-balance-sheet exposures and trading assets and liabilities. The CARES ACT lowered the CBLR to 8% beginning in the second quarter of 2020. Beginning in 2021, the CBLR was increased to 8.5% for the calendar year and will increase to 9% beginning January 1, 2022. A qualifying community banking organization that opts into the CBLR framework and meets all requirements under the framework will be considered to have met the well capitalized ratio requirements under the Prompt Corrective Action regulations and will not be required to report or calculate risk-based capital. The Banks elected to stop reporting their capital ratios under the Community Bank Leverage Ratio as of September 30, 2021.

Federal and state banking regulations place certain restrictions on dividends paid and loans or advances made by the Banks to the Company. Dividends paid by each Bank to the Company would be prohibited if the effect thereof would cause the Bank’s capital to be reduced below applicable minimum capital requirements. Management believes that these restrictions currently do not have a significant impact on the Company.

- 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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