NOTE 9 - REGULATORY CAPITAL REQUIREMENTS

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

REGULATORY CAPITAL REQUIREMENTS

NOTE 9 – REGULATORY CAPITAL REQUIREMENTS

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 September 30, 2020 and December 31, 2019, 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 September 30, 2020 and

December 31, 2019 are presented in the following table (dollars in thousands). As of September 30, 2020 and December 31, 2019, each of the subsidiary banks met the requirements to be “well capitalized”.

										For Capital					To Be Well
										Adequacy Purposes					Capitalized Under
					For Capital					With Capital					Prompt Corrective
	Actual				Adequacy Purposes					Conservation Buffer					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio		Amount			Ratio
As of September 30, 2020:
Company:
Total risk-based capital	$	700,831	14.93	%	$	375,643	>	8.00	%	$	493,031	>	10.50	%	$	469,553	>	10.00	%
Tier 1 risk-based capital		528,228	11.25			281,732	>	6.00			399,120	>	8.50			375,643	>	8.00
Tier 1 leverage		528,228	9.21			229,457	>	4.00			229,457	>	4.00			286,822	>	5.00
Common equity Tier 1		490,273	10.44			211,299	>	4.50			328,687	>	7.00			305,210	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	204,284	12.13	%	$	134,760	>	8.00	%	$	176,872	>	10.50	%	$	168,450	>	10.00	%
Tier 1 risk-based capital		183,131	10.87			101,070	>	6.00			143,182	>	8.50			134,760	>	8.00
Tier 1 leverage		183,131	7.85			93,313	>	4.00			93,313	>	4.00			116,642	>	5.00
Common equity Tier 1		183,131	10.87			75,802	>	4.50			117,915	>	7.00			109,492	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	214,219	12.92	%	$	132,656	>	8.00	%	$	174,112	>	10.50	%	$	165,821	>	10.00	%
Tier 1 risk-based capital		193,384	11.66			99,492	>	6.00			140,948	>	8.50			132,656	>	8.00
Tier 1 leverage		193,384	9.72			79,559	>	4.00			79,559	>	4.00			99,449	>	5.00
Common equity Tier 1		193,384	11.66			74,619	>	4.50			116,074	>	7.00			107,783	>	6.50
Community State Bank:
Total risk-based capital	$	99,123	12.74	%	$	62,222	>	8.00	%	$	81,666	>	10.50	%	$	77,777	>	10.00	%
Tier 1 risk-based capital		89,359	11.49			46,666	>	6.00			66,110	>	8.50			62,222	>	8.00
Tier 1 leverage		89,359	9.85			36,273	>	4.00			36,273	>	4.00			45,341	>	5.00
Common equity Tier 1		89,359	11.49			35,000	>	4.50			54,444	>	7.00			50,555	>	6.50
Springfield First Community Bank:
Total risk-based capital	$	83,283	13.68	%	$	48,718	>	8.00	%	$	63,943	>	10.50	%	$	60,898	>	10.00	%
Tier 1 risk-based capital		71,617	11.76			36,539	>	6.00			51,763	>	8.50			48,718	>	8.00
Tier 1 leverage		71,617	10.27			27,903	>	4.00			27,903	>	4.00			34,879	>	5.00
Common equity Tier 1		71,617	11.76			27,404	>	4.50			42,629	>	7.00			39,584	>	6.50

										For Capital					To Be Well
										Adequacy Purposes					Capitalized Under
					For Capital					With Capital					Prompt Corrective
	Actual				Adequacy Purposes					Conservation Buffer					Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio		Amount			Ratio
As of December 31, 2019:
Company:
Total risk-based capital	$	581,234	13.33	%	$	348,937	>	8.00	%	$	457,980	>	10.500	%	$	436,171	>	10.00	%
Tier 1 risk-based capital		481,702	11.04			261,703	>	6.00			370,746	>	8.500			348,937	>	8.00
Tier 1 leverage		481,702	9.53			202,207	>	4.00			202,207	>	4.000			252,758	>	5.00
Common equity Tier 1		443,864	10.18			196,277	>	4.50			305,320	>	7.000			283,511	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	183,855	11.83	%	$	124,362	>	8.00	%	$	163,225	>	10.500	%	$	155,452	>	10.00	%
Tier 1 risk-based capital		170,137	10.94			93,271	>	6.00			132,134	>	8.500			124,362	>	8.00
Tier 1 leverage		170,137	9.94			68,479	>	4.00			68,479	>	4.000			85,598	>	5.00
Common equity Tier 1		170,137	10.94			69,953	>	4.50			108,817	>	7.000			101,044	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	175,498	11.90	%	$	117,953	>	8.00	%	$	154,813	>	10.500	%	$	147,441	>	10.00	%
Tier 1 risk-based capital		162,127	11.00			88,465	>	6.00			125,325	>	8.500			117,953	>	8.00
Tier 1 leverage		162,127	10.41			62,286	>	4.00			62,286	>	4.000			77,857	>	5.00
Common equity Tier 1		162,127	11.00			66,349	>	4.50			103,209	>	7.000			95,837	>	6.50
Community State Bank:
Total risk-based capital	$	92,095	12.32	%	$	59,813	>	8.00	%	$	78,504	>	10.500	%	$	74,766	>	10.00	%
Tier 1 risk-based capital		85,437	11.43			44,860	>	6.00			63,551	>	8.500			59,813	>	8.00
Tier 1 leverage		85,437	10.39			32,902	>	4.00			32,902	>	4.000			41,128	>	5.00
Common equity Tier 1		85,437	11.43			33,645	>	4.50			52,336	>	7.000			48,598	>	6.50
Springfield First Community Bank:
Total risk-based capital	$	71,074	12.72	%	$	44,704	>	8.00	%	$	58,674	>	10.500	%	$	55,880	>	10.00	%
Tier 1 risk-based capital		63,956	11.45			33,528	>	6.00			47,498	>	8.500			44,704	>	8.00
Tier 1 leverage		63,956	9.70			26,379	>	4.00			26,379	>	4.000			32,974	>	5.00
Common equity Tier 1		63,956	11.45			25,146	>	4.50			39,116	>	7.000			36,322	>	6.50