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, 2019 and 2018, 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, 2019 and 2018 are also presented in the following table (dollars in thousands). As of December 31, 2019 and 2018, the subsidiary banks met the requirements to be “well capitalized”.

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


										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	>	10.50	%	$	436,171	>	10.00	%
Tier 1 risk-based capital		481,702	11.04			261,703	>	6.00			370,746	>	8.50			348,937	>	8.00
Tier 1 leverage		481,702	9.53			202,207	>	4.00			202,207	>	4.00			252,758	>	5.00
Common equity Tier 1		443,864	10.18			196,277	>	4.50			305,320	>	7.00			283,511	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	183,855	11.83	%	$	124,362	>	8.00	%	$	163,225	>	10.50	%	$	155,452	>	10.00	%
Tier 1 risk-based capital		170,137	10.94			93,271	>	6.00			132,134	>	8.50			124,362	>	8.00
Tier 1 leverage		170,137	9.94			68,479	>	4.00			68,479	>	4.00			85,598	>	5.00
Common equity Tier 1		170,137	10.94			69,953	>	4.50			108,817	>	7.00			101,044	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	175,498	11.90	%	$	117,953	>	8.00	%	$	154,813	>	10.50	%	$	147,441	>	10.00	%
Tier 1 risk-based capital		162,127	11.00			88,465	>	6.00			125,325	>	8.50			117,953	>	8.00
Tier 1 leverage		162,127	10.41			62,286	>	4.00			62,286	>	4.00			77,857	>	5.00
Common equity Tier 1		162,127	11.00			66,349	>	4.50			103,209	>	7.00			95,837	>	6.50
Community State Bank:
Total risk-based capital	$	92,095	12.32	%	$	59,813	>	8.00	%	$	78,504	>	10.50	%	$	74,766	>	10.00	%
Tier 1 risk-based capital		85,437	11.43			44,860	>	6.00			63,551	>	8.50			59,813	>	8.00
Tier 1 leverage		85,437	10.39			32,902	>	4.00			32,902	>	4.00			41,128	>	5.00
Common equity Tier 1		85,437	11.43			33,645	>	4.50			52,336	>	7.00			48,598	>	6.50
Springfield First Community Bank:
Total risk-based capital	$	71,074	12.72	%	$	44,704	>	8.00	%	$	58,674	>	10.50	%	$	55,880	>	10.00	%
Tier 1 risk-based capital		63,956	11.45			33,528	>	6.00			47,498	>	8.50			44,704	>	8.00
Tier 1 leverage		63,956	9.70			26,379	>	4.00			26,379	>	4.00			32,974	>	5.00
Common equity Tier 1		63,956	11.45			25,146	>	4.50			39,116	>	7.00			36,322	>	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, 2018:
Company:
Total risk-based capital	$	460,416	10.69	%	$	344,551	>	8.00	%	$	425,305	>	9.875	%	$	430,689	>	10.00	%
Tier 1 risk-based capital		420,569	9.77			258,413	>	6.00			339,168	>	7.875			344,551	>	8.00
Tier 1 leverage		420,569	8.87			189,858	>	4.00			189,858	>	4.000			237,322	>	5.00
Common equity Tier 1		382,899	8.89			193,810	>	4.50			274,564	>	6.375			279,948	>	6.50
Quad City Bank & Trust:
Total risk-based capital	$	162,009	11.38	%	$	113,900	>	8.00	%	$	140,596	>	9.875	%	$	142,376	>	10.00	%
Tier 1 risk-based capital		148,529	10.43			85,425	>	6.00			112,121	>	7.875			113,900	>	8.00
Tier 1 leverage		148,529	9.04			65,744	>	4.00			65,744	>	4.000			82,180	>	5.00
Common equity Tier 1		148,529	10.43			64,069	>	4.50			90,764	>	6.375			92,544	>	6.50
Cedar Rapids Bank & Trust:
Total risk-based capital	$	146,292	11.55	%	$	101,310	>	8.00	%	$	125,054	>	9.875	%	$	126,637	>	10.00	%
Tier 1 risk-based capital		133,982	10.58			75,982	>	6.00			99,727	>	7.875			101,310	>	8.00
Tier 1 leverage		133,982	9.98			53,682	>	4.00			53,682	>	4.000			67,103	>	5.00
Common equity Tier 1		133,982	10.58			56,987	>	4.50			80,731	>	6.375			82,314	>	6.50
Community State Bank:
Total risk-based capital	$	75,233	11.24	%	$	53,567	>	8.00	%	$	66,122	>	9.875	%	$	66,959	>	10.00	%
Tier 1 risk-based capital		69,101	10.32			40,175	>	6.00			52,730	>	7.875			53,567	>	8.00
Tier 1 leverage		69,101	9.19			30,070	>	4.00			30,070	>	4.000			37,588	>	5.00
Common equity Tier 1		69,101	10.32			30,131	>	4.50			42,686	>	6.375			43,523	>	6.50
Springfield First Community Bank:
Total risk-based capital	$	57,051	12.24	%	$	37,278	>	8.00	%	$	46,016	>	9.875	%	$	46,598	>	10.00	%
Tier 1 risk-based capital		51,279	11.00			27,959	>	6.00			36,696	>	7.875			37,278	>	8.00
Tier 1 leverage		51,279	9.39			21,849	>	4.00			21,849	>	4.000			27,312	>	5.00
Common equity Tier 1		51,279	11.00			20,969	>	4.50			29,706	>	6.375			30,289	>	6.50
Rockford Bank & Trust
Total risk-based capital	$	50,648	10.89	%	$	37,208	>	8.00	%	$	45,929	>	9.875	%	$	46,511	>	10.00	%
Tier 1 risk-based capital		44,821	9.64			27,906	>	6.00			36,627	>	7.875			37,208	>	8.00
Tier 1 leverage		44,821	8.93			20,081	>	4.00			20,081	>	4.000			25,101	>	5.00
Common equity Tier 1		44,821	9.64			20,930	>	4.50			29,650	>	6.375			30,232	>	6.50

* December 31, 2019 minimums reflect the fully phased-in ratios (including the capital conservation buffer).

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

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 three 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, 2019 or 2018.

In February 2019, the Company completed a subordinated notes offering. See Note 12 of the Consolidated Financial Statements for further information on this subordinated notes offering.

On February 18, 2020, the Company announced a share repurchase program, permitting the repurchase of up to 800,000 shares of its outstanding common stock, or approximately 5% of the outstanding shares as of December 31, 2019. The repurchase program permits shares to be repurchased in open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rules 10b5-1 and 10b-18 of the SEC. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requiremets and other factors. The repurchase program does not obligate the Company to purchase any particular number of shares.