Note

16.

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

and Tier

capital to risk-weighted assets and of Tier

capital to average assets, each as defined by regulation. Management believes, as of

December 31, 2017

and

2016,

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, t

o be categorized as “well capitalized,” an institution must maintain minimum total risk-based, Tier

risk-based, Tier

leverage and common equity Tier

ratios as set forth in the following tables. The Company and the subsidiary banks’ actual capital amounts and ratios as of

December 31, 2017

and

2016

are also presented in the following table (dollars in thousands). As of

December 31, 2017

and

2016,

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 December 31, 2017:
Company:
Total risk-based capital	$	383,282		11.15	%	$	275,090	>	8.00	%	$	318,073	>	9.250	%	$	343,862	>	10.00	%
Tier 1 risk-based capital		348,530		10.14	%		206,317	>	6.00			249,300	>	7.250			275,090	>	8.00
Tier 1 leverage		348,530		8.98	%		155,256	>	4.00			155,256	>	4.000			194,070	>	5.00
Common equity Tier 1		313,012		9.10	%		154,738	>	4.50			197,721	>	5.750			223,510	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	160,112		12.35	%	$	103,711	>	8.00	%	$	119,916	>	9.250	%	$	129,639	>	10.00	%
Tier 1 risk-based capital		147,472		11.38	%		77,783	>	6.00			93,988	>	7.250			103,711	>	8.00
Tier 1 leverage		147,472		9.52	%		61,985	>	4.00			61,985	>	4.000			77,481	>	5.00
Common equity Tier 1		147,472		11.38	%		58,337	>	4.50			74,542	>	5.750			84,265	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	138,492		11.88	%	$	93,272	>	8.00	%	$	107,846	>	9.250	%	$	116,590	>	10.00	%
Tier 1 risk-based capital		126,601		10.86	%		69,954	>	6.00			84,528	>	7.250			93,272	>	8.00
Tier 1 leverage		126,601		11.68	%		43,348	>	4.00			43,348	>	4.000			54,185	>	5.00
Common equity Tier 1		126,601		10.86	%		52,465	>	4.50			67,039	>	5.750			75,783	>	6.50
Community State Bank:
Total risk-based capital	$	66,271		11.71	%	$	45,293	>	8.00	%	$	52,370	>	9.250	%	$	56,616	>	10.00	%
Tier 1 risk-based capital		61,941		10.94	%		33,970	>	6.00			41,047	>	7.250			45,293	>	8.00
Tier 1 leverage		61,941		9.77	%		25,354	>	4.00			25,354	>	4.000			31,693	>	5.00
Common equity Tier 1		61,941		10.94	%		25,477	>	4.50			32,554	>	5.750			36,801	>	6.50
Rockford Bank & Trust:
Total risk-based capital	$	45,684		11.28	%	$	32,413	>	8.00	%	$	37,477	>	9.250	%	$	40,516	>	10.00	%
Tier 1 risk-based capital		40,615		10.02	%		24,310	>	6.00			29,374	>	7.250			32,413	>	8.00
Tier 1 leverage		40,615		8.94	%		18,177	>	4.00			18,177	>	4.000			22,721	>	5.00
Common equity Tier 1		40,615		10.02	%		18,232	>	4.50			23,297	>	5.750			26,335	>	6.50

											For Capital Adequacy Purposes					To Be Well 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, 2016:
Company:
Total risk-based capital	$	327,440		11.56	%	$	226,587	>	8.00	%	$	244,289	>	8.625	%	$	283,233	>	10.00	%
Tier 1 risk-based capital		296,366		10.46	%		169,940	>	6.00			187,642	>	6.625			226,587	>	8.00
Tier 1 leverage		296,366		9.10	%		130,229	>	4.00			130,229	>	4.000			162,787	>	5.00
Common equity Tier 1		266,419		9.41	%		127,455	>	4.50			145,157	>	5.125			184,102	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	142,990		12.27	%	$	93,212	>	8.00	%	$	100,494	>	8.625	%	$	116,515	>	10.00	%
Tier 1 risk-based capital		129,524		11.12	%		69,909	>	6.00			77,191	>	6.625			93,212	>	8.00
Tier 1 leverage		129,524		9.18	%		56,445	>	4.00			56,445	>	4.000			70,556	>	5.00
Common equity Tier 1		129,524		11.12	%		52,432	>	4.50			59,714	>	5.125			75,735	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	106,791		12.82	%	$	66,623	>	8.00	%	$	71,828	>	8.625	%	$	83,279	>	10.00	%
Tier 1 risk-based capital		96,369		11.57	%		49,968	>	6.00			55,173	>	6.625			66,623	>	8.00
Tier 1 leverage		96,369		10.69	%		36,061	>	4.00			36,061	>	4.000			45,076	>	5.00
Common equity Tier 1		96,369		11.57	%		37,476	>	4.50			42,681	>	5.125			54,132	>	6.50
Community State Bank:
Total risk-based capital	$	68,216		13.81	%	$	39,521	>	8.00	%	$	42,609	>	8.625	%	$	49,402	>	10.00	%
Tier 1 risk-based capital		66,746		13.51	%		29,641	>	6.00			32,729	>	6.625			39,522	>	8.00
Tier 1 leverage		66,746		11.75	%		22,726	>	4.00			22,726	>	4.000			28,408	>	5.00
Common equity Tier 1		66,746		13.51	%		22,231	>	4.50			25,319	>	5.125			32,111	>	6.50
Rockford Bank & Trust:
Total risk-based capital	$	42,007		12.26	%	$	27,410	>	8.00	%	$	29,551	>	8.625	%	$	34,262	>	10.00	%
Tier 1 risk-based capital		37,716		11.01	%		20,558	>	6.00			22,699	>	6.625			27,410	>	8.00
Tier 1 leverage		37,716		9.57	%		15,772	>	4.00			15,772	>	4.000			19,716	>	5.00
Common equity Tier 1		37,716		11.01	%		15,418	>	4.50			17,559	>	5.125			22,270	>	6.50

*The minimums under Basel III phase in higher by

.625%

(the capital conservation buffer) for all ratios other than Tier

leverage annually until

2019.

The fully phased-in minimums are

10.5%

(Total risk-based capital),

8.5%

(Tier

risk-based capital), and

7.0%

(Common equity Tier

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

two

issues of junior subordinated debentures in connection with the Community National acquisition. 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, 2017

2016.

he Company filed a universal shelf registration statement on Form S-

with the SEC on

October 27, 2016,

as amended on

January 11, 2017.

Declared effective by the SEC on

January 31, 2017,

the registration statement allows the Company to offer and sell various types of securities, including common stock, preferred stock, debt securities and/or warrants, from time to time up to an aggregate amount of

$100

million. The Company utilized

$30.1

million of its previous

$100

million shelf registration filing through the offer and sale of its common stock in the

second

quarter of

2016

to help fund the acquisition of CSB (see Note

to the Consolidated Financial Statements). This Form S-

filing replenishes the amount available to the previous level of

$100

million. The specific terms and prices of any securities offered pursuant to the registration statement will be determined at the time of any future offering and described in a separate prospectus supplement, which would be filed with the SEC at the time of the particular offering, if any.